Opinion issued = September 13,=20 2007
=
For=20 The
CONTROL =
SOLUTIONS,=20
INC. AND UNITED PHOSPHOROUS, INC., =
Appellants GHARDA =
CHEMICALS=20
LTD., Appellee
On =
Appeal from the=20
129th District Court Harris =
County,=20
Texas Trial =
Court Cause=20
No. 2004-67993
O P I N =
I O=20
N Appellants, Control Solutions, =
Inc. and=20
United Phosphorous, Inc. (collectively, "CSI"), file this =
interlocutory=20
appeal challenging the trial court's order that granted the =
special=20
appearance motion of Gharda Chemicals, Ltd. ("Gharda Chemicals"). =
In four=20
issues, CSI argues that the trial court erred when (1) it ruled =
that it=20
did not have specific jurisdiction over Gharda Chemicals; (2) it =
failed to=20
consider Gharda Chemicals's post-injury contacts with Texas in its =
general=20
jurisdictional analysis; (3) it did not find the exercise of =
jurisdiction=20
reasonable in light of traditional notions of fair play and =
substantial=20
justice; and (4) it ruled that jurisdiction over Gharda Chemicals =
could=20
not be imputed through the application of the alter ego, single =
business=20
enterprise, and agency doctrines. We reverse and =
remand. Control Solutions is a Texas =
corporation=20
that, among other things, mixes and sells insecticides. Its =
principal=20
place of business is located in Harris County, Texas. Mark Boyd =
serves as=20
the president of Control Solutions. Gharda Chemicals is an Indian =
corporation=20
with several manufacturing facilities in India. It was founded by =
Dr. Keki=20
Gharda, its chairman, managing director, and principal =
shareholder, in=20
1964. Sometime in the 1990s, Gharda =
Chemicals=20
began manufacturing Chlorpyrifos, an insecticide, and Dicamba, an=20
herbicide, and decided to enter the United States market. After =
its first=20
attempt at entering that market failed, Gharda Chemicals hired =
Larry=20
Miller as a consultant to aid in the registration of Chlorpyrifos =
and=20
Dicamba with the Environmental Protection Agency ("EPA"); without=20
registration, the chemicals could not legally be sold in the =
United=20
States. Gharda Chemicals applied for registration in its own name =
in 1996,=20
and the EPA conditionally approved the registration in early 1997. =
In March 1997, Gharda Chemicals =
established Gharda USA, Inc. ("GUSA") as a wholly-owned =
subsidiary=20
"specifically to represent Gharda Chemical[s] in the =
United=20
States." Gharda Chemicals solely capitalized GUSA and retained =
total=20
ownership of all GUSA stock. Dr. Gharda and J.A. Somaiya, who are =
both=20
directors of Gharda Chemicals, served as two of the four directors =
of=20
GUSA. The third director was Uda Maroo, Gharda Chemicals' chief =
financial=20
officer, and the fourth was Mamu Tabbaykan, the sole "US =
director."=20
Anthony Maro became president of GUSA in 2000. As president of =
GUSA, Maro=20
wrote monthly reports to Dr. Gharda that included how much product =
had=20
been sold, to whom, and at what price; how much money was =
outstanding;=20
and, according to Dr. Gharda, why Maro "constantly needed =
infusions of=20
money from Gharda Chemicals to keep himself afloat." After GUSA was formed, Gharda =
Chemicals=20
transferred the EPA registrations for Chlorpyrifos and Dicamba to =
GUSA;=20
but, according to Maro, GUSA made no cash payments for these =
transfers=20
because there was "no money to do that with, and . . . no assets =
to do it=20
with." Ten million dollars that Gharda Chemicals had paid to Dow =
Chemicals=20
and BASF for the right to cite their data to the EPA for =
registration=20
purposes were transferred onto GUSA's books. Gharda Chemicals also =
initially paid for GUSA's membership in various task forces =
because,=20
according to Dr. Gharda, "GUSA was just a shell company initially. =
It=20
didn't . . . have any business. So it didn't have any resources to =
pay."=20
GUSA was thus created, owned, and controlled by Gharda Chemicals =
and=20
served as the U.S. distributor for Chlorpyrifos and =
Dicamba. In making purchases of the =
Chlorpyrifos=20
manufactured by Gharda Chemicals, Boyd, the president of Control=20
Solutions, initially dealt with Miller, the consultant who had =
been hired=20
by Gharda Chemicals. During his deposition, Boyd testified that =
when he=20
was dealing with Miller, he believed Miller to be associated with =
Gharda=20
Chemicals because "his stuff that came to me [Boyd] said 'Agent of =
Gharda=20
Chemical[s]'" and he said that he was "[a]n agent for Gharda =
Chemical[s]"=20
and "worked for Dr. Gharda." In October=20
2002, Hoshang Patel, a member of Gharda Chemicals's board of =
directors,=20
accompanied Maro, GUSA's president, on a visit to Control =
Solutions. At=20
his deposition, Patel explained that the purpose of his visit was =
to let=20
Control Solutions know that Gharda Chemicals "was also interested =
in the=20
products sold here," that it "was watching this deal," and if =
there were=20
ever a problem, Gharda Chemicals would "stand by its products." =
Gharda=20
also provided support by communicating with Howard Stoddard of =
Control=20
Solutions regarding the procedure for melting Chlorpyrifos and =
providing=20
other technological support when GUSA's representatives were not =
able to=20
answer customers' questions. On December 1, 2004, Control =
Solutions=20
filed suit against several parties, including GUSA and Gharda =
Chemicals,=20
for products liability, breach of express warranty, breach of =
implied=20
warranty of merchantability, and negligence. At some point =
thereafter,=20
United Phosphorous intervened in Control Solutions' suit. On =
January 14,=20
2005, Gharda Chemicals filed a special appearance with the trial =
court=20
contesting the court's exercise of personal jurisdiction over it. =
The=20
trial court granted the special appearance without issuing =
findings of=20
fact or conclusions of law. Personal =
Jurisdiction In its first issue, CSI argues that the =
stream of=20
commerce doctrine confers specific personal jurisdiction over =
Gharda=20
Chemicals. Standard of=20
Review Whether a court has personal =
jurisdiction=20
over a defendant is a question of law subject to de novo review. =
BMC=20
Software Bel., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. =
2002);=20
Glattly v. CMS Viron Corp., 177 S.W.3d 438, 445 (Tex.=20
App.--Houston [1st Dist.] 2005, no pet.). The trial court, =
however, must=20
frequently resolve questions of fact before deciding the =
jurisdictional=20
question. BMC Software, 83 S.W.3d at 794. When the trial =
court=20
issues findings of fact and conclusions of law, we may review the =
findings=20
of fact on legal and factual sufficiency grounds and review the=20
conclusions of law de novo as a legal question. Silbaugh v.=20
Ramirez, 126 S.W.3d 88, 94 (Tex. App.--Houston [1st Dist.] =
2002, no=20
pet.) (citing BMC Software, 83 S.W.3d at 794). If the =
trial court=20
does not issue findings of fact and conclusions of law, as here, =
"all=20
facts necessary to support the judgment and supported by the =
evidence are=20
implied." BMC Software, 83 S.W.3d at 795. In other words, =
if the=20
trial court does not issue findings of fact, a reviewing court =
should=20
presume that the trial court resolved all factual disputes in =
favor of its=20
judgment. Tri-State Bldg. Specialties, Inc. =
v. NCI=20
Bldg. Sys., L.P., 184 S.W.3d 242, 246 (Tex. App.--Houston =
[1st Dist.]=20
2005, no pet.) (citing Am. Type Culture Collection, Inc. v.=20
Coleman, 83 S.W.3d 801, 806 (Tex. 2002)). These findings are =
not=20
conclusive when the appellate record includes both the reporter's =
and=20
clerk's records, and they may be challenged for legal and factual=20
sufficiency on appeal. Id. To the extent that the =
underlying=20
facts are undisputed, however, we conduct a de novo review.=20
Glattly, 177 S.W.3d at 445. The plaintiff bears the initial =
burden of=20
pleading sufficient allegations to bring a nonresident defendant =
within=20
the provisions of the Texas long-arm statute. BMC =
Software, 83=20
S.W.3d at 793. A nonresident defendant challenging the =
court's=20
exercise of personal jurisdiction through a special appearance =
carries the=20
burden of negating all grounds for personal jurisdiction alleged =
by the=20
plaintiff. Id.; Glattly, 177 S.W.3d at =
446. Texas Long-Arm =
Statute and=20
Due Process Two requirements must be met =
before a=20
Texas court can exercise personal jurisdiction over a nonresident=20
defendant: (1) the Texas long-arm statute must authorize the =
exercise of=20
jurisdiction and (2) the exercise of jurisdiction must be =
consistent with=20
guarantees of due process. Moki Mac River Expeditions v. =
Drugg,=20
221 S.W.3d 569, 574 (Tex. 2007); Tri-State, 184 S.W.3d at =
248. The Texas long-arm statute =
permits Texas=20
courts to exercise personal jurisdiction over a nonresident With=20
respect to personal jurisdiction, federal due process requires two =
things.=20
First, the nonresident defendant must have purposefully =
established such=20
minimum contacts with the forum state that the defendant could =
reasonably=20
anticipate being sued there. Glattly, 177 S.W.3d at 447 =
(citing=20
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-76, 105 =
S. Ct.=20
2174, 2183-84 (1985)). A nonresident establishes minimum contacts =
with=20
Texas by purposefully availing itself of the privileges and =
benefits=20
inherent in conducting business in the state. Moki Mac, =
221=20
S.W.3d at 575 ("defendant must seek some benefit, advantage or =
profit by=20
'availing' itself of the jurisdiction"); Second, if the nonresident =
defendant has=20
purposefully established minimum contacts with the forum, the =
exercise of=20
personal jurisdiction must also comport with traditional notions =
of fair=20
play and substantial justice. Id. at 447 (citing =
Burger=20
King, 471 U.S. at 476-77, 105 S. Ct. at 2184-85). As to =
fairness, the=20
defendant bears the burden of presenting a "compelling case" that=20
exercising jurisdiction over him would not be fair and just. =
See id.=20
at 450. Only in rare cases will a Texas court's exercise of =
personal=20
jurisdiction not comport with fair play and substantial justice =
when the=20
nonresident defendant has purposefully established minimum =
contacts with=20
the forum state. Guardian Royal Exch. Assurance, Ltd. v. =
English China=20
Clays, P.L.C., 815 S.W.2d 223, 231 (Tex.=20
1991). We, therefore, analyze Gharda =
Chemicals's=20
contacts with Texas to determine whether they satisfy the "minimum =
contacts" requirement of due process under the Texas long-arm =
statute and=20
the Fourteenth Amendment. If so, we must determine whether the =
Texas=20
courts' exercise of jurisdiction over Gharda Chemicals comports =
with=20
traditional notions of fair play and substantial justice.=20
Minimum Contacts=20
The minimum contacts element of due process is divided into =
specific and=20
general personal jurisdiction. Glattly, 177 S.W.3d at =
447;=20
Moki Mac, 221 S.W.3d at 575-76; Schlobohm v. =
Schapiro,=20
784 S.W.2d 355, 357 (Tex. 1990) (explaining that United States =
Supreme=20
Court has "refined the minimum contacts analysis by identifying =
recurring=20
fact patterns and outlining guidelines for application of the due =
process=20
test to these patterns"--i.e., specific and general=20
jurisdiction). A court may exercise general =
jurisdiction=20
over a nonresident defendant if the defendant's contacts with the =
forum=20
state are continuous and systematic, even if the cause of action =
did not=20
arise from or relate to the defendant's contacts with the forum.=20
Glattly, 177 S.W.3d at 447. This inquiry demands that all =
contacts be carefully investigated, compiled, sorted, and analyzed =
for=20
proof of a pattern of continuing and systematic activity.=20
Schlobohm, 784 S.W.2d at 359. A court may exercise specific=20
jurisdiction over a nonresident defendant if his alleged liability =
arises=20
out of or is related to an activity conducted within the =
forum.=20
Moki Mac, 221 S.W.3d at 576;=20
Glattly, 177 S.W.3d at 446 (citing CSR, Ltd. =
v.=20
Link, 925 S.W.2d 591, 595 (Tex. 1996)). The contacts must be=20
purposefully directed at the forum and have a "substantial =
connection"=20
with the forum state that results in the alleged injuries. =
Burger=20
King, 471 U.S. at 473-76, 105 S. Ct. at 2182-84; Moki =
Mac,=20
221 S.W.3d at 584-85; Shell Compa=F1ia Argentina de Petroleo, =
S.A. v.=20
Reef Exploration, Inc., 84 S.W.3d 830, 837 (Tex. =
App.--Houston [1st=20
Dist.] 2002, pet. denied). In considering specific =
jurisdiction,=20
we focus our analysis on the relationship among the =
defendant,=20
the forum, and the litigation. Moki Mac, 221 =
S.W.3d at=20
575-76. Here, CSI =
argues that=20
the Texas courts have specific personal jurisdiction over Gharda =
Chemicals=20
under the stream of commerce doctrine. Stream of Commerce=20
Doctrine The stream of commerce doctrine =
stems=20
from World-Wide Volkswagen Corp. v. Woodson, in which the =
United=20
States Supreme Court stated, "The forum state does not exceed its =
powers=20
under the Due Process Clause if it asserts personal jurisdiction =
over a=20
corporation that delivers its products into the stream of commerce =
with=20
the expectation that they will be purchased by consumers in the =
forum=20
State." 444 U.S. 286, 297-98, 100 S. Ct. 559, 567 (1980). Later, =
however,=20
in Asahi Metal Industry Co. v. Superior Court of California, =
Solano=20
County In determining =
whether=20
the defendant purposefully directed action towards Texas, we may =
look to=20
conduct beyond the particular business transaction at issue, as=20
"[a]dditional conduct of the defendant may indicate an intent or =
purpose=20
to serve the market in the forum State." Moki Mac, 221 =
S.W.3d at=20
577 (quoting Asahi, 480 U.S. at 112, 107 S. Ct. at 1032). =
Some examples of "additional conduct" that may =
indicate=20
an intent to serve the market of the forum state are: (1) =
designing the=20
product for the market in the forum state; (2) advertising in =
the=20
forum state; (3) establishing channels for providing regular =
advice to=20
customers in the forum state; and (4) marketing the product =
through a=20
distributor who has agreed to serve as the sales agent in the =
forum state.=20
Asahi, 480 U.S. at 111, 107 S. Ct. at 1032. Intent to serve the Texas =
market alone is=20
not sufficient, however, to confer specific jurisdiction over a =
foreign=20
defendant. For a Texas court to exercise specific jurisdiction =
over a=20
nonresident defendant, two requirements must be met: (1) not only =
must the=20
defendant have established minimum contacts with Texas by =
purposefully=20
availing itself of the privilege of conducting activities here, =
but also=20
(2) the defendant's liability must have arisen from or be related =
to those=20
contacts. Moki Mac, 221 S.W.3d at 576 (citing Am. =
Type=20
Culture, 83 S.W.3d at 806). Purposeful =
Availment In CSR, the Texas =
Supreme Court=20
held that the nonresident defendant did not purposefully direct =
any act=20
toward Texas indicating that it intended to serve the Texas =
market. 925=20
S.W.2d at 596. In that case, CSR, an Australian company, sold 363 =
tons of=20
asbestos to another company in Australia, which then shipped the =
asbestos=20
to Houston where it was used to manufacture pipe. Id. at =
593-94.=20
In reaching its conclusion, the Supreme Court noted that CSR did =
not=20
advertise its asbestos in Texas, provide advice to Texas buyers, =
have any=20
sales agents in Texas, or create, control, or employ the =
distribution=20
system that brought the asbestos to Texas, and there was no direct =
evidence that CSR knew that the 363 tons of asbestos would be =
distributed=20
in Texas. Id. at 595-96. Here, the=20
factual situation is virtually the opposite of that in =
CSR and=20
Michiana. Boyd,=20
president of Control Solutions, initially dealt with Miller, who,=20
according to Boyd, was working as an agent for Gharda Chemicals. =
Boyd=20
later dealt with Maro, the president of GUSA, but testified that =
Maro did=20
not make pricing decisions, but "went back to Dr. Gharda" for =
pricing=20
decisions, and that "typically it was Dr. Gharda that cut the =
deals with=20
[Boyd]." In October 2002, Patel accompanied Maro on a visit to =
Control=20
Solutions. At his deposition, Patel explained that the purpose of =
his=20
visit was to let Control Solutions know that Gharda Chemicals "was =
also=20
interested in the products sold here," "was watching this deal," =
and if=20
there was ever a problem, Gharda Chemicals would "stand by its =
products."=20
Also in 2002, at Dr. Gharda's request, Boyd traveled to Chicago to =
meet=20
with Dr. Gharda. According to Boyd, he and Dr. Gharda discussed =
"what new=20
products Dr. Gharda could make for [Boyd] in India to sell in =
Texas" and=20
how they could sell more Chlorpyrifos and Dicamba. Boyd suggested =
that=20
they could sell substantial quantities of Chlorpyrifos if the =
price were=20
lowered and they entered into the professional termiticide market, =
which=20
later happened. A very significant amount of Gharda Chemicals's =
sales in=20
the United States of both Chlorpyrifos and Dicamba "were centered =
around=20
Control Solutions." Several=20
months after the fire in Texas that gave rise to this litigation, =
Gharda=20
Chemicals dissolved GUSA, absorbed its assets, and undertook =
direct=20
operations in the United States. According to Patel, a member of =
Gharda=20
Chemicals's board of directors, GUSA=20
"stop[ped] doing business" and "Gharda Chemicals . . . stepped =
into the=20
same offices with the same employees, same warehouse, same =
customers and=20
start[ed] doing business." In Moki=20
Mac, the Texas Supreme Court held that the nonresident =
defendant's=20
activities in Texas were not sufficiently related to the facts of =
the=20
litigation. Id. at 588. In that case, the plaintiffs' =
13-year-old=20
son died on a river rafting trip in Arizona with Moki Mac, a =
Utah-based=20
river rafting outfitter. Id. at 573. Although Moki Mac =
had not=20
directly solicited the plaintiffs to participate in the trip, the =
court=20
found that Moki Mak had purposefully availed itself of the =
Here, in contrast, in March =
2004, 32=20
drums containing Chlorpyrifos, which had been manufactured by =
Gharda=20
Chemicals in India, were sold to Control Solutions in Texas by =
GUSA,=20
shipped directly from India to Texas, and stored in Control =
Solutions'=20
warehouse in Texas. The drums were unsealed and placed in a "hot =
box" for=20
melting pursuant to a procedure received by Control Solutions from =
Gharda=20
Chemicals. Each drum had been sealed at Gharda Chemicals's plant =
in India,=20
and the seals on the drums were not broken until immediately =
before the=20
drums were put in the hot box. Sometime during the melting =
process, the=20
Chlorpyrifos caught on fire and blew open the doors of the hot =
box. The=20
fire spread throughout the warehouse and to a second building. =
Everything=20
inside those two buildings was destroyed, including inventory =
belonging to=20
United Phosphorous. Subsequent analysis by Control Solutions =
revealed that=20
the drums of Chlorpyrifos were contaminated with flammable=20
chemicals. CSI alleged=20
four causes of action against Gharda Chemicals: (1) strict =
products=20
liability; (2) breach of express warranty; (3) breach of implied =
warranty=20
of merchantability; and (4) negligence. All four causes of action =
center=20
around the allegation that the drums of Chlorpyrifos put in the =
hot box in=20
March 2004 were contaminated with flammable chemicals, which =
ultimately=20
caused the fire at Control Solutions. Thus, the operative facts of =
the=20
litigation concern the fire and the contamination of the drums of=20
Chlorpyrifos, and the related questions of (a) whether this =
contamination=20
rendered the Chlorpyrifos defective, (b) whether the delivery of =
the=20
contaminated drums breached an express warranty, the implied =
warranty of=20
merchantability, or both, and (c) whether Gharda Chemicals =
exercised=20
reasonable care in the manufacture and packaging of the =
Chlorpyrifos.=20
Given the facts of this case, =
we conclude=20
that Gharda Chemicals's liability "arises from or relate[s] to the =
forum=20
contacts." Fair Play and =
Substantial=20
Justice Having found that Gharda =
Chemicals=20
purposefully established minimum contacts with Texas, we must =
consider=20
whether the exercise of personal jurisdiction over it comports =
with=20
traditional notions of fair play and substantial justice. See=20
Glattly, 177 S.W.3d at 447 (citing Burger King, 471 =
U.S. at=20
476-77, 105 S. Ct. at 2184-85). In making this inquiry, we =
consider, when=20
appropriate, (1) the burden on the defendant; (2) the interests of =
the=20
forum state in adjudicating the dispute; (3) the plaintiff's =
interest in=20
obtaining convenient and effective relief; (4) the interstate =
judicial=20
system's interest in obtaining the most efficient resolution of=20
controversies; and (5) the shared interest of the several states =
in=20
furthering fundamental, substantive social policies. Guardian=20
Royal, 815 S.W.2d at 231. First, there is no undue burden =
on Gharda=20
Chemicals in defending this case in Texas. Gharda Chemicals owns =
100% of=20
the stock of GUSA, which has not contested the trial court's =
exercise of=20
jurisdiction and against whom CSI's suit will go forward here in =
Texas.=20
Moreover, Gharda Chemicals has been directly conducting business =
in Texas=20
since dissolving GUSA and purchasing all of its assets in =
September 2004.=20
Second, Texas has an interest =
in=20
resolving this dispute because it involves injury to a Texas =
corporation=20
and Texas has a substantial interest in protecting its citizens =
against=20
harm from dangerous products entering this state. See Gen.=20
Refractories Co. v. Martin, 8 S.W.3d 818, 823 (Tex. =
App.--Beaumont=20
2000, pet. denied) (finding that Texas has a manifest interest in=20
protecting residents exposed to products alleged to be =
unreasonably=20
dangerous). Third, as a Texas resident, =
Control=20
Solutions can obtain the most convenient and efficient relief in =
Texas.=20
Fourth, the efficient resolution of this controversy is promoted =
by=20
adjudication in Texas because none of the other parties have =
contested=20
jurisdiction; and trying CSI's suit against Gharda Chemicals in =
Texas will=20
avoid duplication of efforts and minimize the possibility of =
inconsistent=20
findings on common issues. See J.D. Fields & Co. v. W.H. =
Streit,=20
Inc., 21 S.W.3d 599, 605 (Tex. App.--Houston [1st Dist.] =
2000, no=20
pet.) (finding efficient resolution of controversy promoted by=20
adjudication in Texas because suit against defendant company's =
surety was=20
still pending in Texas and reconsolidating suit against defendants =
with=20
suit against surety avoided duplication of efforts and minimized=20
possibility of inconsistent findings on common issues). We do not =
address=20
the fifth factor, as only one state is involved in this=20
dispute. Accordingly, we hold that the =
exercise of=20
personal jurisdiction over Gharda Chemicals does not offend =
traditional=20
notions of fair play and substantial justice. Glattly, =
177 S.W.3d=20
at 447 (citing Burger King, 471 U.S. at 476-77, 105 S. =
Ct. at=20
2184-85). The exercise of personal jurisdiction over Gharda =
Chemicals is=20
supported by the evidence and is, therefore, proper. We sustain CSI's first issue.=20
(4) We reverse the order of the =
trial court=20
that granted Gharda Chemicals's special appearance and remand the =
cause to=20
the trial court for further proceedings consistent with this =
opinion. Evelyn V. Keyes Justice Panel consists of Chief Justice =
Radack=20
and Justices Keyes and Higley.=20
1. A "nonresident" includes "an individual =
who is not=20
a resident of [Texas]" and "a foreign corporation, joint-stock =
company,=20
association, or partnership." Tex. Civ. Prac. & Rem. Code Ann. =
=A7=20
17.041 (Vernon 1997).=20
2. BMC Software Belg., N.V. v. =
Marchand, 83=20
S.W.3d 789, 795 (Tex. 2002) 3. Upon questioning by plaintiff's counsel, =
Patel=20
admitted that of the 50 states, Texas is ranked in the top five as =
a=20
market for Gharda Chemicals's products.=20
4. Because our resolution of CSI's first =
issue is=20
dispositive of this appeal, we need not reach CSI's remaining =
issues.=20
See Tex. R. App. P.=20
47.1.