Court Opinion

ID: 4691462
Source: CourtListenerOpinion
Date Created: 2021-05-31 07:22:13.096794+00
Date Added: 2024-06-11T08:05:08.559145
License: Public Domain

Reversed and Remanded and Memorandum Opinion filed May 27, 2021.

                                       In The

                     Fourteenth Court of Appeals

                               NO. 14-19-00326-CV

                           LG CHEM, LTD., Appellant

                                         V.
                         MICHAEL TURNER, Appellee

                    On Appeal from the 234th District Court
                            Harris County, Texas
                      Trial Court Cause No. 2018-44826

                          MEMORANDUM OPINION

      In this interlocutory appeal, LG Chem, Ltd. appeals the trial court’s denial of
its special appearance. In one issue, appellant contends that the trial court erred in
finding that specific personal jurisdiction exists over appellant in Texas. Because
we conclude that appellee failed to show that appellant’s Texas contacts share a
substantial connection to the operative facts of appellee’s claims, we reverse the
order of the trial court. Appellee raises a conditional cross-point and asks that we
remand the case to the trial court to consider appellee’s request for jurisdictional
discovery. We remand the case to the trial court for consideration of appellee’s
request for jurisdictional discovery.

                              I. SPECIFIC JURISDICTION

      Appellant argues that specific jurisdiction cannot be based on contacts with
the forum that are unrelated to the claim at issue and that appellant’s sales of other
products to other customers in Texas has no bearing on the specific jurisdiction
analysis because such sales are completely unconnected to appellee’s injury.
Appellee contends that the substantial connection exists because appellant ships
this type of battery (18650 lithium-ion) into Texas to Stanley Black and Decker
and this type of battery (18650 lithium-ion) injured appellee in Texas.

      A. Standard of Review

      Whether a trial court has personal jurisdiction over a nonresident defendant
is a question of law we review de novo. Old Republic Nat’l Title Ins. Co. v. Bell,
549 S.W.3d 550, 558 (Tex. 2018). When, as here, the trial court does not issue
findings of fact and conclusions of law, all relevant facts that are necessary to
support the judgment and supported by the evidence are implied. Id. When
jurisdictional facts are undisputed, whether those facts establish jurisdiction is a
question of law. Id.

      When personal jurisdiction is challenged, the plaintiff and the nonresident
defendant bear shifting burdens of proof. Bell, 549 S.W.3d at 559. The plaintiff
bears the initial burden to plead sufficient allegations to bring the nonresident
defendant within the scope of Texas’s long-arm statute. Id. The trial court may
consider the plaintiff’s original pleadings as well as his response to the defendant’s
special appearance in determining whether the plaintiff satisfied his initial burden.
Washington DC Party Shuttle, LLC v. IGuide Tours, 406 S.W.3d 723, 738 (Tex.

                                          2
App.—Houston [14th Dist.] 2013, pet. denied) (en banc). The scope of review
includes all evidence in the record. Id. at 729.

      If the plaintiff meets his initial pleading burden, the burden shifts to the
nonresident defendant to negate all bases of personal jurisdiction alleged by the
plaintiff. Bell, 549 S.W.3d at 559. The defendant can negate jurisdiction on either
a factual or legal basis. Factually, the nonresident defendant can present evidence
that it has no contacts with Texas to disprove the plaintiff’s allegations. Kelly v.
Gen. Interior Constr. Inc., 301 S.W.3d 653, 659 (Tex. 2010).               Legally, the
nonresident defendant can show that even if the plaintiff’s alleged facts are true,
the evidence is legally insufficient to establish jurisdiction; that the contacts do not
constitute purposeful availment; for specific jurisdiction, that the claims do not
arise from the contacts with Texas; or that the exercise of jurisdiction offends
traditional notions of fair play and substantial justice. Id.

      B. Legal Principles

      “Texas courts may exercise personal jurisdiction over a nonresident if ‘(1)
the Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the
exercise of jurisdiction is consistent with federal and state constitutional due-
process guarantees.’” Bell, 549 S.W.3d at 558 (quoting Moncrief Oil Int’l Inc. v.
OAO Gazprom, 414 S.W.3d 142, 149 (Tex. 2013)).                  The long-arm statute is
satisfied when a defendant commits a tort in whole or in part in this state. Id. at
558–59 (citing Tex. Civ. Prac. & Rem. Code § 17.042(2)). However, allegations
that a tort was committed in Texas do not necessarily satisfy the United States
Constitution. Id. at 559.

      To establish personal jurisdiction over a nonresident, federal due process
requires that the nonresident must have “certain minimum contacts with [the forum
state] such that the maintenance of the suit does not offend ‘traditional notions of
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fair play and substantial justice.’” Id. (quoting Int’l Shoe Co. v. State of Wash.,
Office of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945)). A
nonresident establishes minimum contacts with a forum when it “purposefully
avails itself of the privilege of conducting activities within the forum State, thus
invoking the benefits and protections of its laws.” Moki Mac River Expeditions v.
Drugg, 221 S.W.3d 569, 574 (Tex. 2007) (quoting Hanson v. Denckla, 357 U.S.
235, 253 (1958)). “[T]he defendant’s in-state activities ‘must justify a conclusion
that the defendant could reasonably anticipate being called into a Texas court.’”
Bell, 549 S.W.3d at 559 (quoting Retamco Operating, Inc. v. Republic Drilling
Co., 278 S.W.3d 333, 338 (Tex. 2009)).

       When determining whether a defendant has purposefully availed itself of the
privilege of conducting activities in Texas, we consider three factors:

       First, only the defendant’s contacts with the forum are relevant, not
       the unilateral activity of another party or a third person. Second, the
       contacts relied upon must be purposeful rather than random,
       fortuitous, or attenuated. . . . Finally, the defendant must seek come
       benefit, advantage or profit by availing itself of the jurisdiction.

Id. (quoting Moncrief Oil, 414 S.W.3d at 151). We assess the quality and nature of
the contacts, not the quantity. TV Azteca v. Ruiz, 490 S.W.3d 29, 38 (Tex. 2016).

       A defendant’s contacts may give rise to general or specific jurisdiction.
Bell, 549 S.W.3d at 559.1 For a Texas court to exercise specific jurisdiction over a
nonresident defendant: (1) the defendant’s contacts with Texas must be purposeful;
and (2) the cause of action must arise from or relate to those contacts. Id. A
defendant’s awareness “that the stream of commerce may or will sweep the
product into the forum State does not convert the mere act of placing the product

       1
          Only specific jurisdiction is at issue in this appeal. Appellee concedes that general
jurisdiction is not available over appellant.

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into the stream into an act purposefully directed toward the forum State.” Spir Star
AG v. Kimich, 310 S.W.3d 868, 873 (Tex. 2010). Purposeful conduct generally
requires “some ‘additional conduct’––beyond merely placing the product in the
stream of commerce––that indicates ‘an intent or purpose to serve the market in the
forum State.’” Id. (quoting Asahi Metal Indus. Co. v. Superior Court of Cal., 480
U.S. 102, 112 (1987)). Examples of additional conduct may include “designing
the product for the market in the forum State, advertising in the forum State,
establishing channels for providing regular advice to customers in the forum State,
or marketing the product through a distributor who has agreed to serve as the sales
agent in the forum State.” Asahi, 480 U.S. at 112; see also Spir Star, 310 S.W.3d
at 873.

      The nonresident defendant’s purposeful contacts “must be substantially
connected to the operative facts of the litigation or form the basis of the cause of
action.” Bell, 549 S.W.3d at 559–60. Operative facts are the facts that “will be the
focus of the trial, will consume most if not all of the litigation’s attention, and the
overwhelming majority of the evidence will be directed to that question.” Moki
Mac, 221 S.W.3d at 585.

      C. Background

      Appellee alleged that he was injured when a lithium-ion battery used to
power his e-cigarette device ignited while in his pocket and caused severe burns.
The alleged lithium-ion battery used in his e-cigarette was an “Efest IMR 18650
battery.” Appellee sued appellant and the retailer that sold appellee the lithium-ion
battery. Appellee alleged that while the battery contained an “Efest wrapping,” the
battery was manufactured by appellant and sold to a company in China where it

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was “re-wrapped.”2

      Appellee alleged that his injuries occurred in Texas, the “Efest IMR18650”
battery was purchased in Texas, and appellee is a Texas resident. Appellee alleged
that appellant “designed, manufactured, and placed the battery into the stream of
commerce and conducts business in Texas in a continuous and systematic
manner;” “boasts of leading the global market with its manufacture and sale of
lithium-ion batteries; such as the . . . battery at issue in this case;” and “has a
network of wholly-owned subsidiaries in the United States that work together to
sell various products throughout the United States.” Appellee contended that
appellant does not make any distinction between itself and its subsidiaries when
marketing products in the United States. Appellee alleged that appellant targets the
U.S. market in the sale of lithium-ion batteries and does “business every day with
companies at the center of the U.S. economy.” Appellee contended that appellant
maintains relationships with various U.S. entities throughout the country, including
entities with locations in Texas. Appellee alleged the nature of such relationships
consists of shipping lithium-ion batteries directly from Korea to entities in Texas,
including “battery packers” that purchase single lithium-ion battery cells and
incorporate them into larger battery packs.

      Appellant filed a special appearance contesting personal jurisdiction in
Texas and attached the affidavit of a senior manager. The manager contended that
appellant has no systematic connections to Texas and has not engaged in any
“purposeful, forum-directed activities related to” appellee’s claims. The manager
attested that appellant has never had a Texas office, telephone number, post office
box, mailing address, or bank account; has never been registered to do business in

      2
        The company alleged to have re-wrapped the battery is Shenzen Fest Technology Co.,
Ltd. Shenzen is not a party to this appeal.

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Texas; owned or leased real property in Texas; or had a registered agent for service
of process in Texas. The manager attested that appellant has no relationship with
and never authorized Shenzhen to rewrap its “LG 18650 lithium-ion power cells.”
The manager attested that appellant does not design, manufacture, distribute,
advertise, or sell the LG 18650 lithium-ion battery for use by individual consumers
as a replaceable, rechargeable battery in electronic cigarette devices. The manager
further denied that appellant has any relationship with the retailer that sold appellee
the LG 18650 lithium-ion battery and never authorized the retailer to distribute or
sell the LG 18650 lithium-ion battery.             Appellant “has never authorized any
manufacturer, wholesaler, distributor, retailer, or re-seller to advertise, distribute,
or sell” the LG 18650 lithium-ion battery for use by individual consumers “as
replaceable, rechargeable batteries in e-cigarette devices.” Instead, the LG 18650
lithium-ion battery is manufactured “for use in specific applications by
sophisticated companies.” Appellant’s manager also attested that appellant did not
design nor manufacture the LG 18650 lithium-ion battery in Texas.

       In his response, appellee conceded that general jurisdiction was not
appropriate against appellant. Appellee introduced evidence of appellant’s website
and marketing materials and argued that appellant “boasts of leading the global
market with its manufacture and sale of lithium-ion batteries, such as the
cylindrical 18650 batteries at issue in this case.” Appellee contended that appellant
has a network of wholly owned subsidiaries within the United States3 that “sell
various products nationwide” that make nearly $0.76 million every day in batteries
sold or imported into the United States. Appellee argued that appellant “readily
admitted it targets the U.S. market in the sale of lithium-ion batteries for over a
decade and derives substantial revenue from its daily activities in the United
       3
        Appellee further alleged that appellant does not make any distinction between itself and
these wholly owned subsidiaries when marketing its products to the United States.

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States.” Appellee alleged that appellant has a “long-standing” relationship with
Stanley Black and Decker in Texas and that appellant provides “some” 18650
batteries for use in power tools.     Appellee contended that appellant “ships its
batteries directly to [Stanley Black and Decker], and therefore purposefully targets
the Texas market.” There is also “at least one LG plant” in Texas, although
appellee conceded that without additional information, he was not able to ascertain
appellant’s relationship with this Texas LG plant. Appellee alleged that one of
appellant’s subsidiaries, LG Chem America, Inc., maintains a license to do
business in Texas.     Appellant and LG Chem America “work in concert” to
distribute batteries in the United States. Lastly appellee contended that appellant is
defending other “similar lawsuits” in Texas “without contesting jurisdiction” citing
to one case.

      D. Substantial Connection

      That the cause of action arises from or is related to the defendant’s forum
contacts, “lies at the heart of specific jurisdiction by defining the required nexus
between the nonresident defendant, the litigation, and the forum.” Moki Mac, 221
S.W.3d at 579. To satisfy this requirement, there must be a substantial connection
between the defendant’s contacts and the operative facts of the litigation. Spir Star
AG, 310 S.W.3d at 874. “That similar products were sold in Texas would not
create a substantial connection as to products that were not.” Id. Here, such a
substantial connection is lacking. See Bristol-Myers Squibb Co. v. Super. Ct. of
Cal., 137 S. Ct. 1773, 1781 (2018) (“Nor is it sufficient––or even relevant––that
BMS conducted research in California on matters unrelated to Plavix. What is
needed––and what is missing here––is a connection between the forum and the
specific claims at issue.”); see also Ford Motor Co. v. Montana Eighth Judicial
Dist. Court, 141 S. Ct. 1017, 1028 (2021) (“Ford had advertised, sold, and serviced

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those two car models in both States for many years. (Contrast a case, which we do
not address, in which Ford marketed the models in only a different State or region).
. . . Ford had systematically served a market in Montana and Minnesota for the
very vehicles that the plaintiffs allege malfunctioned and injured them in those
States.”).

      Appellee argues that this case has “the precise connections between the
claims at issue and the forum that were absent in Bristol Myers.” In Bristol-Myers
the Supreme Court concluded that a group of non-resident plaintiffs could not
establish the “relatedness” component of the specific jurisdiction test because,
although Bristol-Myers had many connections to the forum (California), the non-
resident plaintiffs’ claims did not share a connection with the forum. See id. The
Supreme Court rejected the notion that “the more wide ranging the defendant’s
forum contacts, the more readily is shown a connection between the forum contacts
and the claim to specific jurisdiction.” Id. at 1778. Instead, the Supreme Court
criticized California’s approach stating that under it, “the strength of the requisite
connection between the forum and the specific claims at issue is relaxed if the
defendant has extensive forum contacts that are unrelated to those claims.” Id. at
1781. “For specific jurisdiction, a defendant’s general connections with the forum
are not enough.” Id. The Supreme Court then focused on the connections lacking
with the chosen forum—that the non-resident plaintiffs were not prescribed Plavix
in California, did not purchase Plavix in California, did not ingest Plavix in
California, and were not injured by Plavix in California. Id. Thus, for specific
jurisdiction purposes, it did not matter that the defendant had a presence in
California, including research and laboratory facilities, and had sold millions of
Plavix pills in the state. Id. at 1778. Because there was no connection between the
defendant’s California contacts and the non-resident plaintiffs’ claims, specific

                                          9
jurisdiction could not be exercised. See id. at 1781.

      Here, while it is undisputed that appellant sells some amount and some types
of lithium-ion batteries into Texas and has a relationship with Stanley Black and
Decker, there is no evidence, nor even an allegation that these connections with
Texas are in any way connected to appellee’s claims. There is no evidence that,
after manufacturing the 18650 lithium-ion battery and placing it into the stream of
commerce, appellant did anything further to bring it into Texas. Appellee did not
allege that the batteries that appellant ships to Stanley Black and Decker are among
those that end up in Texas smoke shops for purchase by consumers, only that the
same type of battery, the 18650 lithium-ion battery, is shipped by appellant to
Stanley Black and Decker in Texas. Plaintiff also did not allege that appellant’s
subsidiaries are connected in any way to the sale or distribution of appellant’s
lithium-ion batteries in Texas smoke shops.         Appellee generally alleged that
appellant markets its batteries to the United States but has not alleged that
appellant has specifically targeted Texas, marketed this type of battery to Texas, or
designed this battery for the Texas market. See Spir Star, 310 S.W.3d at 873
(holding that exercising jurisdiction over nonresident requires some additional
conduct that indicates an intent or purpose to serve the market in the forum State).

      Appellee argues that his claims arise out of the same product that appellant
directly sells in Texas to Stanley Black and Decker. However, while appellee
alleged that appellant has targeted the U.S. market and derived substantial revenue
from sales of lithium-ion batteries generally, appellee failed to detail or allege that
appellant had derived substantial revenue from Texas sales of its lithium-ion
batteries generally or with relation to the specific battery at issue in this case.
Appellee only alleged that appellant has a long-standing relationship with Stanley
Black and Decker and believes appellant to ship lithium-ion batteries directly into

                                          10
Texas, but appellee did not detail the amount or the types of lithium-ion batteries
that are shipped to Texas by appellant. Appellee alleged, “It is known within the
general public that power tools, such as cordless drills, are sold with rechargeable
battery packs and that at least some of the batteries used in said battery packs are
lithium-ion 18650 batteries manufactured by [appellant].” Appellant’s manager
attested that appellant manufactures this type of battery “for use in specific
applications by sophisticated companies” and “does not design, manufacture,
distribute, advertise, or sell lithium-ion power cells for use by individual
consumers as replaceable, rechargeable batteries in electronic cigarette devices.”
The record is devoid of any other connection between appellant, the type of battery
at issue, and Texas. See Schexnider v. E-Cig Central, LLC, No. 06-20-00003-CV,
2020 WL 6929872, *9 (Tex. App.––Texarkana Nov. 25, 2020, no pet.) (mem. op.)
(“[T]here was no evidence that LG Chem had sold or shipped a significant amount
of its HG2 batteries in Texas. There was no evidence that LG Chem or any of its
authorized distributors had shipped or sold any HG2 batteries to E-Cig or any other
Texas customer, except SBD. The evidence and unnegated allegations showed
only that LG Chem sold an undetermined amount of its HG2 batteries to SBD for
use in its battery packs, some of which came to Texas. There was no evidence or
unnegated allegations that Schexnider’s claims arose from LG Chem’s only Texas
contacts, the sale of its HG2 batteries to SBD for use in its battery packs.”); see
also LG Chem Am., Inc. v. Morgan, No. 01-19-00665-CV, 2020 WL 7349483, *7,
*11 (Tex. App.—Houston [1st Dist.] Dec. 15, 2020, no pet. h.) (mem. op.)
(considering plaintiff’s “undisputed allegations and evidence . . . that LGC
designed and manufactured its lithium-ion 18650 batteries for the Texas market,
advertised them in Texas, and marketed them in Texas through a distributor that
sold them in Texas” and concluding that these allegations showed “that [the
plaintiff’s] claims arise from or relate to the manufacture, marketing, and sale of
                                        11
LGC’s batteries in Texas, which injured [the plaintiff] in Texas”).4

       As the Supreme Court explained in World-Wide Volkswagen and reiterated
again in Bristol-Myers, “[e]ven if the defendant would suffer minimal or no
inconvenience from being forced to litigate before the tribunals of another State;
even if the forum State has a strong interest in applying its law to the controversy;
even if the forum State is the most convenient location for litigation, the Due
Process Clause, acting as an instrument of interstate federalism, may sometimes act
to divest the State of its power to render a valid judgment.”                    World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 294 (1980); see also Bristol-Myers,
137 S. Ct. at 1780–81. Because appellee failed to show that appellant’s Texas
contacts share a substantial connection to the operative facts of appellee’s claims,
we reverse the order of the trial court.

                          II.     JURISDICTIONAL DISCOVERY

       Appellee raises a conditional cross-point, requesting that we remand to allow
the trial court to consider whether to allow jurisdictional discovery. Appellee
requested additional discovery in his response to appellant’s special appearance.
The trial court did not rule on this request because it determined that it had
jurisdiction over appellant and denied appellant’s special appearance. A trial court
has discretion to allow additional time for jurisdictional discovery. See Lamar v.
Poncon, 305 S.W.3d 130, 139 (Tex. App.—Houston [1st Dist.] 2009, pet. denied).

       4
          Unlike in Lg Chem America, Inc. v. Morgan, in this case appellees did not allege or
provide evidence that appellant “designed and manufactured its lithium-ion 18650 batteries for
the Texas market, advertised them in Texas, and marketed them in Texas through a distributor
that sold them in Texas.” 2020 WL 7349483, *7, *11. Instead, appellee generally alleged that
appellant ships batteries to Stanley Black and Decker, some of which are 18650 lithium-ion
batteries, and that because appellant ships its batteries directly to Stanley Black and Decker,
appellant purposefully targets the Texas market. In Morgan, the plaintiff “produced more than
2,200 pages of spreadsheets that he argued showed” numerous shipments by LG Chem, Ltd., into
Texas to various companies within Texas.

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In this case, it is appropriate to remand to the trial court to consider whether to
allow jurisdictional discovery. See id. (remanding for further discovery concerning
general jurisdiction); Morris Indus., Inc. v. Trident Steel Corp., No. 01-09-01094-
CV, 2010 WL 4484351, at *4–5 (Tex. App.—Houston [1st Dist.] Nov. 10, 2010,
no pet.) (mem. op.) (reversing trial court’s denial of special appearance and
remanding for jurisdictional discovery).

                                III.   CONCLUSION

      Because we conclude that appellee has not shown that appellant’s Texas
contacts are substantially connected to the operative facts of this case, we reverse
the trial court’s order. We remand the case for the trial court to consider whether
to allow appellee to obtain jurisdictional discovery.

                                       /s/      Ken Wise
                                                Justice

Panel consists of Chief Justice Christopher and Justices Wise and Zimmerer.

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