Applying the “stream-of-commerce-plus” test for personal jurisdiction, the Houston [14th] Court of Appeals has upheld a trial court order denying the special appearance of an opioid manufacturer organized in Delaware and with its principal place of business in New Jersey in litigation brought by Dallas and Bexar Counties. The court, however, dismissed the same claims against the manufacturer’s holding company.
Amneal Pharmaceuticals, Inc. and Amneal Pharmaceuticals LLC v. County of Dallas and Amneal Pharmaceuticals, Inc. and Amneal Pharmaceuticals LLC v. County of Bexar (No. 14-23-00202 and 14-23-00203; April 30, 2024) arose from suits brought by the counties against several pharmaceutical companies accusing them of negligently or intentionally oversupplying opioids and creating a public health crisis. Defendants Amneal LLC and Amneal Pharmaceuticals, Inc. (API), Delaware companies with principal places of business in New Jersey, filed a joint response and special appearances, which the trial court denied. Defendants sought interlocutory relief.
In an opinion by Chief Justice Christopher, the court of appeals affirmed in part and reversed in part. Taking up Amneal LLC first, the court engaged in a “stream-of-commerce-plus” analysis to determine whether Amneal specifically targeted the Texas market for opioid sales. The counties presented a supply-chain expert to, among others, one of Amneal’s three largest customers, Cardinal Health (good lawyering, there). The expert averred that pharmaceutical companies generally sell and distribute their products through big wholesalers, such as McKesson, AmerisoureBergen, or Cardinal Health, or big chain pharmacies like Walgreen’s and CVS. Amneal, in the court’s words, “disclaimed any knowledge about the pharmaceutical supply chain.” The court didn’t buy this, especially given that Amneal’s co-CEO was a pharmacist who worked for CVS’s predecessor company on, among other things, pharmaceutical distribution. Additionally, Amneal contracted directly with HEB in Texas, as well as with the Texas Health and Human Services Commission for CHIP and Medicaid. And in order to qualify to do business with the state, the company had to provide a certificate of liability insurance and pricing information and to obtain a Texas license as a wholesale drug distributor. Thus, the court determined, Amneal’s contacts with Texas were deliberately targeted to Texas and “ar[ose] out of contracts that the ‘defendant himself create[d] with the forum State” (citations omitted). This satisfied the “purposeful availment” prong of the test.
The court had no difficulty finding that the evidence supported the trial court’s determination that “there is a substantial connection between Amneal’s Texas contacts and the operative facts of the litigation,” since the evidence plainly showed that nearly 90% of the opioids dispensed to Medicaid or CHIP recipients in Dallas and Bexar Counties were “medically unjustifiable” and led to a high rate of overdoses, accidental deaths, and associated injuries, increased health-care costs, diversion of drugs into criminal markets, “and other social ills.” Next, the court found that exercising personal jurisdiction over Amneal would not offend traditional notions of fair play and substantial justice because: (1) Texas has a significant interest in claims involving injuries to its citizens from products purposefully brought into the state; (2) Plaintiffs have an interest in obtaining convenient and effective relief in a Texas forum because their causation and damage witnesses are in Texas, as well as the fact that their cases are part of an MDL established in 2018; (3) the most efficient way to resolve the litigation is in a Texas forum; and (4) Texas has a substantive policy interest in addressing the opioid crisis. The court, consequently, affirmed the trial court’s order denying Amneal’s special appearance.
API, however, got a different result. API based its special appearance on the fact that, as merely a holding company for Amneal, it did not manufacture or distribute anything, is not registered with the Secretary of State to do business in Texas, has no regular place of business in Texas, and has no medications listed on the Texas Medicaid formulary. It argued further that the trial court erred when it imputed Amneal’s Texas contacts to API as Amneal’s alter ego. The court agreed. First, the court observed that “Texas law presumes that separate companies are distinct” (citations omitted). To overcome this presumption, the plaintiff must show “that the parent exercises ‘abnormal’ or ‘atypical’ control over the subsidiary” (citations omitted). The court held that Plaintiffs failed to make this showing because: (1) API was only a minority owner of Amneal; (2) though the companies had a common mailing address, that fact alone doesn’t mean anything special; (3) there was no evidence that the companies did not “observe corporate formalities”; (4) Amneal’s testifying executives, who referred to their employer as “Amneal,” professed no knowledge of API’s operations; and (5) though API’s Form 10-K represented that API had the power to make Amneal’s business decisions and control its management, the two companies remained distinct in the observance of corporate formalities, and, even so, “it is not sufficient that one company exerts commercial and financial control over another, where formalities of separateness are maintained” (citations omitted). The court thus reversed the trial court’s order denying API’s special appearance and dismissed the counties’ claims against it.
As noted above, this case is part of In re Texas Opioid Litigation, MDL No. 2018-63957; No. 18-0538). The last action in the case appears to have occurred in March 2019, when the MDL panel denied the state’s motion to remand its case against Perdue Pharma from the MDL to a Travis County district court. Since that time, the state has settled with various entities, including Johnson & Johnson, Teva, McKesson, Cardinal Health, CVS, Walgreens, Allergan, Janssen, McKinsey, Walmart, and others.
