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AVCO CORPORATION v. PRECISION AIRMOTIVE, INC.

United States District Court, N.D. Texas, Dallas Division
Aug 16, 2004
Civil Action No. 3:03-CV-2720-K (N.D. Tex. Aug. 16, 2004)

Opinion

Civil Action No. 3:03-CV-2720-K.

August 16, 2004


MEMORANDUM OPINION AND ORDER


Before the Court is Defendant's Amended Motion to Dismiss for Lack of Personal Jurisdiction or, in the Alternative, to Transfer Venue. Having considered the merits of the motion, and because Defendant is subject to the Court's specific jurisdiction, the motion is DENIED.

I. Background

Plaintiff AVCO Corporation ("AVCO") alleges that at some point in 1992, Defendant Precision Airmotive, Inc. ("Precision") sold it a Model RSA5 Fuel Servo (the "fuel servo") designed and manufactured by Precision. In March of 1992, AVCO attached the fuel servo to an aircraft engine which was designed and manufactured by AVCO.

After the fuel servo was attached on the engine, AVCO exported the engine to France, where it was installed on an Aerospatiale Socata TB-20 Trinidad aircraft. The aircraft was then sent to the United States and assembled in Grand Prairie, Texas. In 1995, the aircraft was sold to James Notch of Texas, who kept and maintained the aircraft in Texas.

On or about December 9, 1997, Mr. Notch departed Texas for Roanoke, Virginia on a business trip. On December 10, while attempting to return to Texas, the aircraft crashed after take-off in Roanoke. Mr. Notch was killed in the crash. AVCO contends that the crash was allegedly caused by an alleged product defect in the RSA5 fuel servo manufactured by Precision. In its Second Amended Complaint, AVCO goes on to state that "[a]llegedly, this defect began to manifest itself while in the State of Texas but did not result in a complete product failure until it fortuitously occurred in the State of Virginia."

In 2000, AVCO was one of several defendants in a case brought by Mr. Notch's family members and his estate in Key Notch, Individually, and as Independent Executrix of The Estate of James Stephen Notch, Deceased, et al. v. Aerospatiale, et al., Civil Action No. 99-CV-0709-Y, Northern District of Texas, Fort Worth Division (hereinafter referred to as "Notch"). The plaintiffs in that case sued the defendants for strict liability and negligence, and sought recovery for damages incurred by Mr. Notch's estate and wrongful-death beneficiaries for injuries and damages incurred by them in the State of Texas. In that case, the plaintiffs alleged that the engine was defective based on the design and operation of the fuel servo and that the defect was the producing cause of their respective injuries.

As a defendant in the Notch case, AVCO brought a third-party complaint against Precision for contribution and for common law and statutory indemnity under Chapter 82 of the Texas Civil Practice Remedies Code. Based on an agreement between the parties, AVCO dismissed its claim for contribution against Precision with prejudice, and its claim for indemnity without prejudice. The agreement, which is attached as Exhibit A to AVCO's second amended complaint in this case, states in pertinent part: "[i]n the event AVCO Corporation considers settlement of all Plaintiffs'/Intervenors' claims in the Notch action, it agrees to confer in advance with Precision regarding such settlement, and the parties shall address related issues such as indemnification at that time."

In late 2002 and 2003, AVCO mediated, negotiated and agreed to confidential settlements with Kay Notch, Kelly Notch, and the Estate of James Notch for all of their existing and potential claims against AVCO in the Notch action. AVCO complains that throughout the mediation process, Precision failed to negotiate AVCO's indemnity claims, as had been the parties' agreement.

Accordingly, AVCO brought this action against Precision on October 10, 2003, in the 193rd District Court of Dallas County, Texas, and Precision timely removed the case to this Court on November 10, 2003. In the case, AVCO seeks indemnity for all liability and expenses it incurred in the Notch litigation. AVCO contends that it was an innocent retailer of the fuel servo, which it claims was designed and manufactured by Precision. AVCO contends that it is entitled to indemnity under both Texas common law and Chapter 82 of Texas Civil Practice and Remedies Code for the amounts it paid to the parties in the underlying Notch litigation. AVCO further asserts that it is not independently culpable for the claimants' damages in Notch. In response to AVCO's Complaint, Precision filed its motion to dismiss for lack of personal jurisdiction or, in the alternative, motion to transfer venue to the United States District Court for the Western District of Washington, Seattle Division.

II. Standard on a Motion to Dismiss

The Texas long-arm statute applies in this case. The Texas long-arm statute has the same scope as the U.S. Constitution, so this Court may only exercise jurisdiction over the Defendant if jurisdiction is consistent with the Due Process Clause. See Alpine View Co. v. Atlas Copco A.B., 205 F.3d 208, 214 (5th Cir. 2000). The Due Process Clause permits the exercise of personal jurisdiction over a nonresident defendant when (1) that defendant has purposefully availed itself of the benefits and protections of the forum state by establishing "minimum contacts" in that state; and (2) the exercise of jurisdiction over that defendant does not offend "traditional notions of fair play and substantial justice." Id. at 214-15 (quoting International Shoe Co. v. State of Washington, 326 U.S. 310, 316 (1945)).

"Minimum contacts" can be established through either specific jurisdiction or general jurisdiction. See Alpine View, 205 F.3d at 215. Specific jurisdiction over a nonresident defendant exists when it has purposefully directed its activities at the forum state and the litigation results from alleged injuries that arise from or relate to those activities. See id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)). General jurisdiction exists when the nonresident defendant's contacts with the forum state, although not related to the plaintiff's cause of action, are "continuous and systematic." Alpine View, 205 F.3d at 215 (quoting Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 414 (1984).

Once a defendant presents a motion to dismiss for lack of personal jurisdiction, the plaintiff has the burden of establishing the Court's jurisdiction over a defendant. See Gundle Lining Constr. v. Adams Cty. Asphalt, Inc., 85 F3d 201, 204 (5th Cir. 1996). In its response to a defendant's motion to dismiss for lack of personal jurisdiction, the plaintiff cannot stand on its pleadings, but must, through affidavits or otherwise, set forth specific facts demonstrating that the Court has jurisdiction. See Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991).

When the Court does not conduct an evidentiary hearing, the party seeking to assert jurisdiction must present facts sufficient to make out a prima facie case supporting personal jurisdiction. See Alpine View, 205 F.3d at 215. The Court accepts as true that party's uncontroverted allegations, resolving in its favor all conflicts between the facts contained in the parties' affidavits and other documentation. See id. However, the Court is not required to give credit to conclusory allegations, even if they are uncontroverted. See Panda v. Brandywine Corp. v. Potomac Elec. Power Comp., 253 F.3d 865, 868-69 (5th Cir. 2001).

III. Whether the Court May Exercise Personal Jurisdiction over Precision

In its Second Amended Complaint, AVCO states that Precision is subject to both general and specific jurisdiction in this case. The Court will discuss whether it may exercise personal jurisdiction over Precision based on either type of jurisdiction.

A. General Jurisdiction

AVCO contends that from 1992 through 2003, Precision "was systematically and continuously doing business in Texas." Specifically, AVCO states that the following business activities by Precision justify the exercise of general jurisdiction in this case: (1) controlling the amount of AVCO products included in the inventory of Ryder/Aviall, which AVCO alleges is one of Precision's distributors, located in Dallas, Texas; (2) obtaining sales forecasts from Ryder/Aviall in Texas for Precision's products purchased and distributed through Ryder/Aviall; (3) orchestrating nationwide distribution of its sales literature through Ryder/Aviall; (4) entering into a distribution agreement with Ryder/Aviall in which it agreed to indemnify Ryder/Aviall for any liability it could incur as a result of the purchase and sale of its products; (5) having its President travel to Dallas, Texas to participate in trade show meetings and sales meetings with representatives of Ryder/Aviall and Superior Air Parts, Inc. ("Superior"), which is also located in Dallas, Texas; (6) selling approximately $500,000 worth of its products to Ryder/Aviall in Dallas, Texas; (7) organizing and performing a sales presentation to Ryder/Aviall employees dealing with its products in Addison, Texas; (8) contracting with Hatfield Aviation, Inc. ("Hatfield") in Houston, Texas to perform warranty services on its products in Texas; (9) selling its parts to Hatfield in connection with warranty repairs performed by Hatfield; (10) forming an agreement whereby Hatfield would indemnify Precision in connection with Hatfield's performing warranty repair work on Precision's products; (11) contracting with Hatfield for Hatfield to obtain insurance coverage for the parties' indemnification agreement; (12) forming an agreement with Hatfield whereby Precision had the right to on-site inspections of Hatfield's facilities to ensure compliance with the terms of the warranty agreement; (13) distributing its factory overhauled "fuel controls" through Superior, Ryder/Aviall and Hatfield, all of which are located in Texas; (14) acquiring "core units" for its fuel controls from Superior, Ryder/Aviall, and Hatfield in Texas for use in Precision's "factory overhaul" program; (15) placing several phone calls and facsimile transmissions to Texas residents and entities regarding the sale and servicing of Precision's products in Texas; (16) selling its products to Texas Skyways, Inc. ("Texas Skyways") in Boerne, Texas; (17) maintaining an interactive internet website through which it solicits comments from around the world, including Texas; and (18) coordinating referrals to and from or between Precision's and Aviall's websites for Texas residents in order to facilitate the purchase of Precision products through Aviall in Dallas, Texas.

It is AVCO's burden to present facts establishing a prima facie case of personal jurisdiction over Precision. Because these contacts are not of the continuous or systematic nature required for the exercise of personal jurisdiction, Precision's contacts in Texas are not sufficient to establish the exercise of general jurisdiction over Precision.

In determining whether personal jurisdiction exists over Precision, the Court does not examine each of Precision's contacts with Texas in isolation from the others; instead, the Court must examine the totality of Precision's contacts in order to determine whether they constitute the type of continuous and systematic contacts required to satisfy due process. See Holt Oil Gas Co. v. Harvey, 801 F.2d 773, 779 (5th Cir. 1986). Given this standard, it is apparent that general jurisdiction does not exist over Precision.

Precision presents the affidavit of its Secretary, Kenneth L. Moburg, as evidence that it is not subject to general jurisdiction. In his affidavit, Mr. Moburg states the following: (1) Precision is not qualified, authorized, or licensed to do business in Texas; (2) Precision does not maintain a registered agent in Texas; (3) Precision does not have any officers, directors, employees, or agents located in Texas; (4) Precision does not pay taxes to the State or to any municipal or county governmental unit in Texas; (5) Precision does not maintain any facilities or places of business in Texas; (6) Precision does not own or lease any property, real or personal, in Texas; (7) Precision has no mailing address or answering service in Texas, nor does it have any contact information in Texas whatsoever; and (8) Precison does not advertise in any publication based in Texas or which is aimed primarily at Texas residents. Mr. Moburg's testimony is not controverted by AVCO.

AVCO relies primarily on contracts between Precision and parts dealers located in Texas, communications initiated by Precision towards Texas, and Precision's websites in its attempt to establish the existence of general jurisdiction over Precision. Unfortunately for AVCO, these contacts are not the sort of contacts which constitute "continuous and systematic" business activities. See Holt, 801 F.2d at 779 (holding that general jurisdiction was proper over an Oklahoma resident defendant where the defendant maintained constant and extensive business connections in Texas throughout his life, as compared to mere "random," "fortuitous," or "attenuated" contacts). Indeed, the fact that Precision sells a little over $1,000,000 annually in parts to independent companies located in Texas and occasionally advertises in a way that reaches Texas residents is not sufficient to establish general jurisdiction. See Bearry, 818 F.2d at 375-76 (holding that although the nonresident defendant sold products to seventeen independent dealers in forum state and took part in a national advertising campaign which reached consumers in forum state, the defendant was not "doing business" in Texas, and general jurisdiction was not proper). Similarly, Precision's use of a website through which it allegedly solicits comments from individuals worldwide is not sufficient to support the exercise of general jurisdiction. See Mink v. AAAA Development LLC, 190 F.3d 333, 336-37 (5th Cir. 1999) (holding that when residents of the forum state are not allowed to place orders or enter into contracts with the nonresident defendant through its internet site, the exercise of personal jurisdiction on the basis of the internet site is not proper).

Any contacts Precision has with the State of Texas are sporadic, and are not of the "continuous and systematic" nature which would make it anticipate being haled into court here. Accordingly, Precision is not subject to the general jurisdiction of the Court.

B. Specific Jurisdiction

As stated above, specific jurisdiction exists if two conditions are met: (1) the defendant has purposefully directed its activities at the forum State; and (2) the litigation results from alleged injuries that arise from or relate to those activities. See Alpine View, 205 F.3d at 215. In this case, AVCO argues that specific jurisdiction exists over Precision based on the "stream of commerce" theory. Under the stream of commerce theory, a court may exercise specific jurisdiction over a nonresident defendant corporation when the defendant's contact with the forum arises from the sale or manufacture of a product which has caused harm in the forum state, so long as the defendant corporation delivered the product into the stream of commerce expecting that it should be purchased by or used by consumers in the forum state. See Gulf Consol. Services, Inc. v. Corinth Pipeworks, S.A., 898 F.2d 1071, 1073 (5th Cir. 1990).

1. Precision's Placing of the Fuel Servo into the Stream of Commerce

The Supreme Court has stated that by placing a product into the stream of commerce with the knowledge that the product will be used in the forum state, a defendant has done enough to establish minimum contacts. See Ruston Gas Turbines, Inc. v. Donaldson Co., Inc., 9 F.3d 415, 419 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 298 (1980)). Indeed, mere foreseeability or awareness is a constitutionally significant basis for asserting personal jurisdiction if the defendant's product made its way into the forum state while still in the stream of commerce. See id. at 419.

The Fifth Circuit has developed a consistent approach to be used in determining whether a nonresident defendant's actions in placing a product into the stream of commerce are sufficient to establish specific jurisdiction in a case. In Bean Dredging Corp. v. Dredge Technology Corp., 744 F.2d 1081 (5th Cir. 1984), the court held that a Louisiana court could exercise specific jurisdiction over a Washington corporation which manufactured steel casings and injected them into the stream of commerce, when the steel casing were the only contacts the corporation had with Louisiana. The court reached its conclusion in spite of the fact that the nonresident defendant in that case was a component manufacturer that did not control the distribution system which ultimately placed its product in the forum state. See id. at 1085. Specifically, the court held that even though the nonresident defendant did not originate the distribution system and had no control over it, the company did place the products in and move them along a stream of commerce destined for retail sale in finished products throughout the United States. See id.

Additionally, in Petroleum Helicopters, Inc. v. AVCO Corp., the Fifth Circuit Court of Appeals explicitly stated that specific jurisdiction may be asserted over a nonresident defendant that manufactures a component part in one state for incorporation into a finished product in a second state meant to be sold to consumers in a third state. See 804 F.2d 1367, 1370 (5th Cir. 1986). The court held that under World-Wide Volkswagen, specific jurisdiction was properly exercised when the evidence showed that the nonresident defendant corporation made its products available for purchase in as many forums as possible. See id. One court has even gone so far as to hold that merely placing an injury-causing product or a component part of the product into the stream of commerce for distribution in the United States, without attempting to limit the ultimate distribution of the product to certain forums within the United States, is sufficient to establish specific jurisdiction under the stream of commerce theory. See In re Norplant Contraceptive Products Liability Litigation, 886 F. Supp. 586, 590 (E.D. Tex. 1995).

The evidence is undisputed that Precision placed the fuel servo into the stream of commerce in Washington, and from there the stream eventually carried the fuel servo to Texas. Precision sold the fuel servo in question to AVCO in 1991, who installed it on an engine which it sold to Socata Aerospatiale in France. Socata subsequently installed AVCO's engine in the Socata TB-20 aircraft, serial no. 1506. The aircraft was then shipped to Socata's affiliated company, Aerospatiale General Aviation in Grand Prairie, Texas, in late 1992. In November 1995, Mr. Notch purchased the aircraft from Aerospatiale General Aviation. Precision does not dispute this evidence, nor does it contend that the fuel servo was purchased by a retail customer outside of Texas. Under Bean and its progeny, Precision's act of selling the fuel servo to a world-wide distributor of aircraft engines — without attempting to limit the final destination of the servo in any way — is sufficient to subject it to specific jurisdiction in a case involving the alleged failure of the fuel servo.

2. Whether the Fuel Servo Caused Harm in Texas

Precision argues that even if it was aware the fuel servo might be sold to a consumer in Texas, any harm caused by the servo occurred outside of Texas. Specifically, Precision argues that the exercise of specific jurisdiction is not proper because: (1) the underlying plane crash occurred in Virginia, not Texas; (2) Mr. Notch's estate and survivors did not sue Precision and are not parties to this case; (3) the decision of Mr. Notch's estate and survivors to sue AVCO while not bringing suit against Precision, together with AVCO's decision to settle those claims, are unilateral acts of third parties which cannot give rise to personal jurisdiction; and (4) any harm AVCO suffered occurred in Delaware or Rhode Island, where AVCO is incorporated and has its principal place of business, respectively. See Alpine View, 205 F.3d at 216 (holding that a court may exercise specific jurisdiction over a nonresident defendant when the defendant's contact with the forum state stems from a product which causes harm in the forum state); Bell Helicopter Textron, Inc. v. CC Helicopter Sales, Inc., 2001 WL 290569, *3-4 (N.D. Tex. March 21, 2001) (Kendall, J.).

Precision's arguments are without merit. First, although Mr. Notch himself suffered injury in Virginia, as a Texas resident, his estate and survivors suffered injury in Texas as a result of the crash. Additionally, when harm has occurred in the forum state, all the law requires is that the plaintiff's cause of action relate to the defendant's contact with the forum, so long as the defendant's contact results from its own purposeful conduct, and not the unilateral activity of others. See Bearry v. Beech Aircraft Corp., 818 F.2d 370, 374 (5th Cir. 1987). In this case, Precision purposefully placed the fuel servo into the stream of commerce, which ultimately brought the fuel servo to Texas for retail sale. The "unilateral acts of others" alleged by Precision are not the sort of unilateral acts which defeat the exercise of specific jurisdiction in some cases. The type of unilateral acts which are insufficient to subject a defendant to a court's jurisdiction are those similar to the one present in World-Wide Volkswagen. There, the nonresident defendant, which sold its automobiles to customers in New York, New Jersey, and Connecticut, was not subject to suit in Oklahoma, when the only contact the defendant had with Oklahoma was through the plaintiffs' doing. See World-Wide Volkswagen, 444 U.S. at 566-67. Here, however, the aircraft was purchased in Texas, and much of the underlying harm occurred in Texas. If this were Virginia, and AVCO was bringing suit in a Virginia court based on the airplane's crashing in that state, Worldwide Volkswagen might then apply.

Perhaps Precision's strongest argument is that the harm at issue in this case occurred in Delaware and Rhode Island, AVCO's state of incorporation and its principal place of business, respectively. Still, even if AVCO technically did not suffer financial injury in Texas, that fact in and of itself is insufficient to prevent the Court from properly exercising personal jurisdiction over Precision. While the case law requires that harm occur in the forum state as a result of the nonresident defendant's actions, the law does not mandate that the particular plaintiff suffer that harm. The issue of AVCO's state of incorporation and its principal place of business comes into play when determining whether the exercise of jurisdiction violates the traditional notions of fair play and substantial justice. However, all the law requires for the proper exercise of specific jurisdiction over Precision in this case is that the instant litigation arise from or relate to Precision's purposeful direction of its activities at Texas. See Burger King, 471 U.S. at 472.

Without the plane crash made the subject of the Notch litigation, this case would not exist. As AVCO alleges that Precision manufactured and placed into the stream of commerce a fuel salvo which AVCO alleges contributed to the plane crash, Precision's manufacture and sale of the fuel salvo directly relates to the case at bar. Accordingly, this Court may properly exercise specific jurisdiction over Precision in this case.

IV. Fair Play and Substantial Justice

The due process inquiry limits the court's power to exercise personal jurisdiction over a nonresident if the exercise of jurisdiction under the circumstances would offend "traditional notions of fair play and substantial justice." International Shoe, 326 U.S. at 316 (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). In determining whether the exercise of jurisdiction violates traditional notions of fair play and substantial justice, the court evaluates the following factors: (1) the burden on the defendant by having to litigate in the forum; (2) the forum state's interests in the lawsuit; (3) the plaintiff's interests in convenient and effective relief; (4) the judicial system's interest in efficient resolution of controversies; and (5) the shared interest of states in furthering fundamental social policies. See Wien Air Alaska v. Brandt, 195 F.3d 208, 215 (5th Cir. 1999); World-Wide Volkswagen, 444 U.S. at 292. It is Precision's burden to show that, in light of these factors, conducting litigation in this court would be "so gravely difficult and inconvenient" that it would be at a "severe disadvantage" in comparison to the plaintiff. Burger King, 471 U.S. at 478 (citations omitted).

Precision relies in part on Bearry in arguing that conducting this litigation in the Northern District of Texas would be unfair. In Bearry, the court held that asking the nonresident defendant to defend the suit in Texas would be unfair when the case involved a plane crash which occurred in Mississippi, and the plaintiffs were representatives of deceased Louisiana residents. See Bearry, 818 F.2d at 377. However, the facts of that case render it inapposite to this litigation. There, the evidence before the court established that plaintiffs' plane was not designed or manufactured in Texas, had never been owned by a Texas resident, and had never been repaired in or serviced in Texas. See id. at 373. Here, however, Precision placed the fuel servo into the stream of commerce, which led the fuel servo to Texas. The aircraft was assembled in Texas, Mr. Notch purchased the aircraft in Texas, and the aircraft was serviced and stored in Texas. Also, since AVCO is asserting a statutory indemnity claim under Texas law, Texas courts have an interest in adjudicating the controversy. Therefore, while Defendant may be burdened by defending a suit in Texas, this burden is not substantial enough to render the exercise of jurisdiction in this case unconstitutional.

V. Motion to Transfer Venue

In the alternative, Precision asks the Court to transfer this case to the U.S. District Court for the Western District of Washington, Seattle Division, under 28 U.S.C. § 1406(a). That provision states that "[t]he district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." 28 U.S.C. § 1406(a).

It is AVCO's burden to show that it instituted this action in a permissible forum, and Precision's only burden is to prove a defect in venue sufficient to enable the Court to dismiss or transfer the action. See Sampson Indus., Inc. v. Amega Indus., Inc., 1998 WL 826907, *2 (N.D. Tex. Nov. 18, 1998) (Solis, J.). The general venue statute provides that venue is only proper in: (1) a district where the defendant resides; (2) a district in which a substantial part of the events giving rise to the claim occurred, or (3) a district in which any defendant may be found, if there is no other district in which the action may be brought. See 28 U.S.C. § 1391(b).

While Precision does not reside in Texas, a substantial part of the events giving rise to AVCO's indemnity claim occurred in the Northern District of Texas. Most importantly, the stream of commerce brought the fuel servo from Precision to Mr. Notch in Grand Prairie, Texas, which is in the Northern District of Texas. Additionally, AVCO's suit is based on a settlement agreement it reached in litigation in Fort Worth, Texas, which is also in the Northern District of Texas. Therefore, it can fairly be said that a substantial part of the events giving rise to this litigation occurred in the Northern District of Texas.

The only defect in jurisdiction which Precision alleges is that the Court lacks personal jurisdiction over it. However, as has been discussed at length, that is not the situation here. Accordingly, Precision's alternative motion to transfer pursuant to § 1406(a) is DENIED.

VI. Conclusion

For the reasons stated above, Precision's motion to dismiss, and its alternative motion to transfer, is DENIED.

SO ORDERED.


Summaries of

AVCO CORPORATION v. PRECISION AIRMOTIVE, INC.

United States District Court, N.D. Texas, Dallas Division
Aug 16, 2004
Civil Action No. 3:03-CV-2720-K (N.D. Tex. Aug. 16, 2004)
Case details for

AVCO CORPORATION v. PRECISION AIRMOTIVE, INC.

Case Details

Full title:AVCO Corporation, Plaintiff, v. PRECISION AIRMOTIVE, INC., Defendant

Court:United States District Court, N.D. Texas, Dallas Division

Date published: Aug 16, 2004

Citations

Civil Action No. 3:03-CV-2720-K (N.D. Tex. Aug. 16, 2004)