The Dallas Court of Appeals has reversed a trial court denial of a German manufacturer’s special appearance in a product liability case arising out of the high-profile redevelopment of the Statler Hotel in Dallas.
Aquatherm GmbH v. Commerce Statler Development, LLC and 1914 Commerce Leasing, LLC (No. 05-24-00795-CV; March 6, 2025) arose from the renovation and repurposing of the hotel. Statler hired a general contractor who retained a plumbing subcontractor, which purchased Aquatherm pipe from three suppliers. Aquatherm GmbH, a German company, manufactured the pipe and sold it its affiliate Aquatherm LP, a Delaware entity headquartered in Utah. LP runs an independent, discretionary distribution network with no German involvement. LP then sold the pipe to the suppliers, who sold it the plumbing subcontractor. When Statler experienced problems with the plumbing system, it sued GmbH, LP, and other parties in a Dallas district court. GmbH filed a special appearance, which the trial court denied. GmbH sought interlocutory relief.
In an opinion by Justice Lee, the court of appeals reversed and dismissed GmbH from the case. Plaintiffs conceded that Texas had no general jurisdiction over GmbH in the absense of continuous and systematic contracts. Instead, they asserted that specific jurisdiction existed based on the relationship between GmbH and LP (LP did not contest jurisdiction). Their jurisdictional evidence consisted of photos and videos of the Statler that appeared on GmbH’s website and the location of suppliers in Texas who market and sell Aquatherm pipe in the state, based on which they argued that GmbH purposefully availed itself of Texas law and traditional notions of fair play and substantial justice would not be offended by exercising jurisdiction. Running through the ususal analysis of the case law, the court applied the “stream-of-commerce-plus” test, which requires a nonresident defendant to do more than merely foresee that its products will end up in Texas. Examples of “plus factors,” according to SCOTX, include “marketing the product through a distributor who has agreed to serve as the sales agent in the forum [s]tate” or “creating, controlling, or employing the distribution system that brough the product into the forum state” (citations omitted).
Statler sought to show “purposeful availment” by focusing on GmbH’s distribution network in Texas (operated by LP with LP sales agents), its global business that includes shipping products to Texas, and visits by GmbH executives to projects in Texas. Looking “to the quality and nature of a non-resident’s contacts, rather than the quantity when conducting minimum contacts analysis,” the court noted first that it could not “fuse” GmbH with LP because Plaintiffs produced no evidence that GmbH controls LP’s internal business operations at all, much less to the degree necessary to disregard the corporate fiction. For one thing, LP is an independent affiliate, not a subsidiary. GmbH is itself a subsidiary of Aquatherm Besitzgesellschaft, a German limited partnership that is the parent holding company of both GmbH and LP. “[T]here is evidence,” the court observed, that GmbH “purposefully designed its company and operations to avoid contact with Texas” by operating independently of LP with “different operations, management, employees, and places of business.” From time to time, GmbH shipps directly to Texas at the request of LP’s or another customer’s direct request, but for the most part, GmbH ships through a European port to the U.S., where LP takes title and possession for distribution. GmbH thus “does not choose where its pipes ultimately end up, be it in Texas or any of the other states where they are installed through LP’s suppliers network.” Though GmbH issues a ten-year express warranty, it leaves the terms of the warranty to U.S. suppliers, who report problems to LP, not to GmbH. The court brushed aside the website argument, since everybody has one, and while GmbH executives did briefly visit the Statler in 2016 on their way to an event in Tulsa (and once in 2011 to view a site in Houston), that hardly constituted purposeful availment of Texas law. Regarding GmbH’s trademarks, the court acknowledged that GmbH could hypothetically purposefully avail itself Texas law to protect them, but extrapolating specific jurisdiction from such a possibility “would be inappropriate in evaluating where actual purposeful availment is present and would create the kind of universal jurisdiction this court has rejected.” The court thus concluded that insufficient minimum contacts existed for specific jurisdiction.
Having found insufficient minimum contacts, the court didn’t need to determine whether GmbH’s contacts were significant enough to show that the alleged liability arose out of or was related to GmbH’s activities in Texas. Likewise the court did not need to assess whether exercising jurisdiction over GmbH would offend traditional notions of fair play and substantial justice, nor did it find any evidence that GmbH had the requisite intentionality required for a “plus” factor. The court thus reversed the trial court order and rendered judgment granting the special appearance and dismissing GmbH from the case.
Justice Lee’s analysis is worth reading: scholarly, thorough, and instructive as to each of the elements of the “stream-of-commerce-plus” test.
