Applying a recent decision of the Texas Supreme Court, the Houston [14th] Court of Appeals has held that a Harris County district court may exercise personal jurisdiction over two foreign manufacturers that distributed lithium-ion batteries in Texas.
Like its sister case, LG Chem America, Inc. and LG Chem, Ltd. V. Tommy Morgan (No. 21-0094), LG Chem America, Inc. and LG Chem, Ltd. V. Justin Wilson (No. 14-22-00371-CV; filed July 25, 2023) arose from an alleged injury sustained by Wilson when a lithium-ion battery he bought to recharge his e-cigarette blew up in his pocket. Wilson sued the manufacturer and distributor of the battery (the LG Chem defendants), the cigarette manufacturer, and the retail store where he bought the battery. The LG Chem defendants filed special appearances, arguing that Texas did not have specific personal jurisdiction because “they did not send the batteries to Texas for resale to individual consumers to use with e-cigarettes” but only to other manufacturers for incorporation into their products, such as cordless power tools and laptop computers. The trial court denied the special appearances.
In an opinion by Justice Jewell, the court of appeals affirmed. Plaintiff argued that specific purpose jurisdiction was established by the fact that the defendants targeted the Texas market specifically when they placed the batteries in the stream of commerce with the specific object of selling them to Texas industries and retailers. Defendants countered that plaintiff presented no evidence that plaintiff’s claims arose from or are related to any purposeful contacts with Texas because defendants do not manufacture, distribute, or sell the batteries for individual use for recharging E-cigarettes but only for industrial applications. At issue was whether the defendants established the “minimum contacts” with Texas necessary to confer specific jurisdiction and whether the maintenance of the suit was “reasonable and ‘does not offend traditional notions of fair play and substantial justice’” (citations omitted). A court determines this based on a two-pronged test: (1) whether the defendant “purposefully availed itself of the privilege of conducting activities in the forum state,” such that the defendant may reasonably expect to be haled into court; and (2) whether the plaintiff’s claim arises out of or relates to the defendant’s contacts with the forum state (the “relatedness inquiry”).
The court of appeals applied the “stream-of-commerce-plus” standard, which requires additional conduct by the defendant beyond merely placing a product in the stream of commerce without “evincing ‘an intent or purpose to serve the market in the forum state’” (citations omitted).As SCOTX ruled in the sister case. plaintiff need not make a “causal showing” and the relatedness requirement “is satisfied when a company ‘serves a market for a product in the forum State and the product malfunctions there.’”
The LG Chem defendants did not contest that they purposefully availed themselves of the Texas market but that plaintiff’s claim did not arise from their contacts with Texas. They basef this argument on a distinction between the purpose for which they manufacture, distribute, and sell batteries in Texas, i.e. for sale to other manufacturers for incorporation into their products, and the unintended sale of the battery at issue to an individual consumer who used it for an improper purpose. SCOTX rejected this argument, declining to “shift focus to whether the plaintiff is within a particular Texas market segment—the ‘industrial component’ market—[defendants] intended to serve.” But what the defendants intended is beside the point in the jurisdictional analysis. The “whole forum,” that is, the State of Texas, is the relevant market when it comes to the stream-of-commerce-plus test. The LG Chem defendants could not deny that they targeted and sold thousands of batteries in Texas, and the same battery allegedly exploded and caused injury. The relatedness prong was thus satisfied.
The court of appeals likewise remained unpersuaded that the defendants’ argument that they had no “clear notice,” as required by due process, that they would be haled into a Texas court under these circumstances. When they deliberately sold the batteries into the Texas market, rather, they “purposefully availed themselves of Texas laws and have enjoyed the benefits and protection of Texas laws” (citation omitted).
While Morgan and Wilson appear to resolve a potentially significant number of jurisdictional disputess involving exploding lithium-ion batteries in the pockets of persons of E-cigarette and vaping product users, bear in mind that specific jurisdiction must be found on a case-by-case basis. That’s why in Morgan SCOTX declined to get into the weeds on each one of them. “While we disapprove of any reliance on the argument that the LG Chem defendants’ intent to serve the industrial versus the individual-consumer market segment” for the batteries,” Justice Huddle wrote, “we express no opinion on whether these cases, each of which is accompanied by a unique evidentiary record, were correctly decided.” Nevertheless, the fact of so many of these cases are virtually identical, indicating litigation trouble ahead for the defendants.
