Products Liability Law Daily No Texas jurisdiction over German auto parts manufacturer in Smart For two action
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Thursday, April 23, 2020

No Texas jurisdiction over German auto parts manufacturer in Smart For two action

By David Yucht, J.D.

The decedent’s estate failed to establish the German component parts manufacturer’s minimum contacts with Texas and, therefore, did not satisfy the first prong of the appellate court’s three-factor test for specific jurisdiction over nonresident manufacturers.

A panel for the U.S. Court of Appeals for the Fifth Circuit has agreed with a federal district court in Texas that under a stream-of-commerce theory, it was proper to grant a German vehicle parts manufacturer’s motion to dismiss for lack of personal jurisdiction in a products liability action brought by the estate of a driver who was killed when his Smart For two vehicle was rear-ended, resulting in the collapse of the driver’s seat. Because the Texas federal court could not exercise specific personal jurisdiction over the German manufacturer of vehicle component parts, the appellate court, in an unpublished opinion, affirmed the lower court’s ruling dismissing the case (Zoch v. Magna Seating (Germany) GmbH, April 22, 2020, Engelhardt, K.).

A Texas resident was driving his 2008 Daimler Smart For two automobile when he was rear-ended by another car after slowing or stopping for traffic. The impact pushed his vehicle into a car in front of him. Due to an alleged malfunction in the driver’s seat anchor, his seat collapsed, causing him to be propelled backward inside the vehicle and he hit his head on the rear of the vehicle’s interior. As a result, he suffered a fatal brain injury.

The deceased driver’s car was designed by Daimler AG in Germany and assembled in France. The metal structural components of the car’s driver seat were designed by a German company in Germany according to Daimler’s specifications. The metal and structural components of the seats were sold and supplied to Magna Seating (Germany) GmbH. Magna, in turn, assembled the seats for the car in Germany, after which it forwarded the finished seats to Daimler’s French plant. The completed vehicle was sold to a U.S. distributor who in turn sold it to a new car dealer in Texas. The vehicle was purchased new in 2008. Thereafter, a Toyota dealership in Plano, Texas, acquired the vehicle through a trade-in and sold it to the driver in this case.

The driver’s estate brought a products liability action against several entities, including Magna, alleging claims for design and manufacturing defects and negligence, among others. The district court dismissed the case finding a lack of personal jurisdiction. The estate appealed, arguing that the lower court improperly applied a stream-of-commerce approach, as opposed to the stricter stream-of-commerce-plus approach adopted by the Texas courts.

Jurisdiction—stream of commerce. The appellate court explained that in determining whether due process allowed for the exercise of specific jurisdiction, the Fifth Circuit applied a three-factor test: (1) whether the defendant has minimum contacts with the forum state; (2) whether the plaintiff’s cause of action arises out of or results from the defendant’s forum-related contacts; and (3) whether the exercise of personal jurisdiction is fair and reasonable. The court determined that Magna did not have the minimum contacts with Texas needed to allow for specific personal jurisdiction. Rather than the "stream-of-commerce-plus" test utilized by Texas state courts, the federal courts in Texas apply the "stream of commerce" test to determine whether there is specific jurisdiction over nonresident manufacturers. The Fifth Circuit examined whether there was proof that Magna placed its product "into the stream of commerce" with the expectation that it would be purchased by or used by consumers in the forum state. Magna, manufactured and supplied vehicle seats to Daimler’s assembly plant in France, knowing that those seats would be placed in vehicles destined for the U.S. generally, not Texas specifically. The estate had no proof that Magna was aware that any of its seats manufactured for the 2008 Smart For two would likely end up in Texas. The most the estate could show was that Magna’s contract with Daimler might lead to its products being sold anywhere in the U.S. Moreover, the estate presented no evidence concerning the number of subject model cars actually sold in Texas or income generated from those Texas sales from which the court might have been able to infer Magna’s knowledge of the likely number of its seats that would end up in Texas. Additionally, Magna did not have an exclusive sales contract with the distributor and did not have control over the sales or marketing of the final product.

Finally, the Fifth Circuit noted that the estate’s argument relied on the fact that Texas―by virtue of it being a populous state―commanded a large portion of the automobile market. The court opined that permitting jurisdiction here would essentially confer jurisdiction to any state with a large population when a manufacturer sells its products to a national distributor.

Because the appellate court concluded that the estate failed to establish minimum contacts with Texas and, therefore, did not satisfy the first prong of the Fifth Circuit’s three-factor test for specific jurisdiction, the court said that it did not need to address the second and third prongs of its test—i.e., whether the plaintiff’s claims arose out of Magna’s contacts with Texas and whether exercising jurisdiction over Magna would be fair and reasonable.

The case is No. 18-41151.

Attorneys: Jeffrey Todd Embry (Hossley& Embry, L.L.P.) for Henry Zoch, II. Michael W. Eady (Thompson, Coe, Cousins & Irons, L.L.P.) for Magna Seating (Germany) GmbH.

Companies: Magna Seating (Germany) GmbH

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