We have reported on several appeals involving whether a Texas court may exercise personal jurisdiction over a nonresident, including most recently Justice Busby’s opinion in In re Christianson Air Conditioning & Plumbing, LLC and Continental Homes of Texas, LP (No. 20-0384). The Houston [1st Dist.] Court of Appeals has now opined on the issue in a coverage dispute between dozens of excess liability carriers and a Virginia-based shipbuilding company arising from asbestos litigation.
In Huntington Ingalls Incorporated v. Certain Underwriters at Lloyd’s London and Those Solvent London Market Insurance Companies Severally Subscribing to the Subject Insurance Policies (No. 01-21-00262-CV), Huntingdon filed an interlocutory appeal challenging the trial court’s denial of its special appearance under Rule 120a, TRCP. The insurers brought a declaratory judgment action in Harris County seeking a declaration of rights and obligations under certain excess liability policies for personal injury claims against Huntington based on exposure to asbestos. The policies, which were in effect from 1968 to 1986, were procured and paid for by Tenneco for and on behalf of its subsidiaries, one of which was Newport News Shipbuilding and Dry Dock Company, Huntingdon’s corporate predecessor. The insurers asserted that Texas had personal jurisdiction over Huntingdon because the entire insurance transaction occurred in Tenneco’s corporate headquarters in Houston. Huntingdon filed a special appearance, in which it argued that at no time had its predecessor ever done business in Texas, own property in Texas, or maintain a registered agent in Texas. The trial court denied the special appearance, and Huntingdon appealed.
The court of appeals reversed and rendered in favor of Huntington. The court’s analysis turned on whether Tenneco’s procurement and management of the insurance program for its subsidiaries could be imputed to Huntingdon’s predecessor to establish the necessary minimum contacts required for personal jurisdiction. Observing that under Texas law parent companies and their subsidiaries are treated as separate entities, unless the plaintiff can show that the parent “controls the corporation’s business operations and affairs to an atypical degree, exerting authority greater than that normally associated with ownership and directorship,” thus establishing an alter-ego relationship (citing PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 175 (Tex. 2007)). A parent’s “ordinary and routine interactions” with a subsidiary, including “the supervision of a subsidiary’s finance and capital budget decisions, the formulation of general policies for the subsidiary, the provision of general liability insurance and employee group health insurance policies to a subsidiary, and the offering of a stock option plan to the subsidiary’s employees,” do not indicate “atypical” control (citations omitted). Based on this standard, the court of appeals had little trouble in rejecting the insurers’ jurisdictional argument. Simply procuring, paying for, and managing insurance policies on behalf of a subsidiary do not establish the subsidiary’s minimum contacts with forum.