Azteca Milling LP et al v. Great Western Manufacturing Co Inc et al

Filing 34

MEMORANDUM OPINION AND ORDER denying 13 MOTION to Dismiss for Lack of Jurisdiction filed by Sefar Inc. (Ordered by Judge Sidney A Fitzwater on 10/19/2017) (Judge Sidney A Fitzwater)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
AZTECA MILLING, L.P.,
Individually and as assignee of
TRUCO ENTERPRISES, L.P.,
Plaintiff,
VS.
GREAT WESTERN
MANUFACTURING CO., INC.
and SEFAR, INC.,
Defendants.

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CIVIL ACTION NO. 3:17-CV-1669-D

MEMORANDUM OPINION
AND ORDER
A defendant sued on claims for strict product liability and negligence moves to
dismiss under Fed. R. Civ. P. 12(b)(2) for lack of in personam jurisdiction. For the reasons
that follow, the court denies the motion.
I
Plaintiff Azteca Milling, L.P. (“Azteca”), individually and as assignee of Truco
Enterprises, L.P. (“Truco”), is a Texas limited partnership in the corn masa flour market.
Azteca operates six corn flour production facilities in the United States, including one in
Henderson, Kentucky (“Henderson Facility”) and one in Edinburg, Texas (“Edinburg
Facility”). The corn flour produced at these facilities is used as an ingredient by other food
manufacturers, including Truco, Azteca’s assignor. To produce corn flower, Azteca sifts the
material through industrial sifters purchased, at least in part, from defendant Great Western

Manufacturing Co., Inc. (“GWM”). Azteca employs “HS” free swinging sifters at the
Henderson and Edinburg Facilities that use replacement sifter screens made of stainless steel
bolt cloth mesh. Azteca purchases these replacement sifter screens from GWM. The sifter
screens that GWM sells Azteca are manufactured by defendant Sefar, Inc. (“Sefar”).
Truco uses Azteca’s corn flour to produce tortilla chips and other Mexican-style food
products. In late August 2016, Azteca received a report from Truco that some of Truco’s
retail customers found small wire fragments in Truco’s tortilla chips. Azteca conducted an
investigation and determined that the wire fragments found in the tortilla chips matched the
stainless steel bolt cloth mesh sifter screens purchased from GWM and manufactured by
Sefar. Azteca’s investigation into the Henderson Facility revealed that a number of screens
in that facility’s inventory contained loose wires intertwined within the wire mesh sifter
screen. Azteca later conducted a companywide investigation that revealed the same issue in
a number of screens at the Edinburg Facility. As a result, in late September 2016 Azteca
initiated a voluntary recall. The investigation and the recall caused Azteca significant
expense.
In 2017 Azteca brought the instant suit against GWM and Sefar, alleging claims for
breach of contract and warranty, strict product liability, and negligence. Azteca sues Sefar
on claims for strict product liability and negligence.1 In support of its strict product liability
claim, Azteca alleges that it suffered damage to its corn flour through wire fragment

1

Because the present motion is brought only on behalf of Sefar, the court will focus
its analysis only on the claims alleged against Sefar.
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contamination. See Am. Compl. 14, ¶¶ 70-75. On behalf of Truco, Azteca alleges the same
regarding damage to Truco’s tortilla chips. See id. at 17, ¶ 94-99. In support of its
negligence claim, Azteca alleges that Sefar had a duty to “ensure that the sifter screens were
fit for use” and to “inspect the sifter screens to ensure they were free of contaminants prior
to shipment”; that Sefar breached that duty; that the damages resulting were reasonably
foreseeable; and that the harms were actually and proximately caused by Sefar’s action.2 Id.
at 14-15, ¶¶ 76-80. Azteca alleges the same on behalf of Truco. See id. at 18, ¶¶ 100-104.
Azteca alleges in its amended complaint that the court has personal jurisdiction over
Sefar, asserting that “[t]he contracts between the Parties which give rise to the instant causes
of action were negotiated and performable in Texas, and elsewhere,” and that “[t]he harm to
Plaintiffs caused by Defendants’ actions also occurred in Texas and elsewhere.” Id. 2-3, ¶
7. Sefar moves to dismiss under Rule 12(b)(2), contending that the court cannot exercise in
personam jurisdiction over it.
II
“When a nonresident defendant presents a motion to dismiss for lack of personal
jurisdiction, the plaintiff bears the burden of establishing the district court’s jurisdiction over
the nonresident.” Stuart v. Spademan, 772 F.2d 1185, 1192 (5th Cir. 1985) (citing Thompson
v. Chrysler Motors Corp., 755 F.2d 1162, 1165 (5th Cir. 1985)). The determination whether

2

In its negligence claims against Sefar, Azteca alleges that its harms are a direct and
proximate result of only GWM’s negligence. The court assumes that Azteca intends to allege
all elements of a negligence claim against Sefar.
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a federal district court has in personam jurisdiction over a nonresident defendant is bipartite.
The court first decides whether the long-arm statute of the state in which it sits confers
personal jurisdiction over the defendant. If it does, the court then resolves whether the
exercise of jurisdiction is consistent with due process under the United States Constitution.
See Mink v. AAAA Dev. LLC, 190 F.3d 333, 335 (5th Cir. 1999). Because the Texas
long-arm statute extends to the limits of due process, the court need only consider whether
exercising jurisdiction over Sefar would be consistent with the Due Process Clause of the
Fourteenth Amendment. See id.; Alpine View Co. v. Atlas Copco AB, 205 F.3d 208, 214 (5th
Cir. 2000).
The Due Process Clause of the Fourteenth Amendment permits
the exercise of personal jurisdiction over a nonresident
defendant when (1) that defendant has purposefully availed
[it]self of the benefits and protections of the forum state by
establishing “minimum contacts” with the forum state; and (2)
the exercise of jurisdiction over that defendant does not offend
“traditional notions of fair play and substantial justice.” To
comport with due process, the defendant’s conduct in
connection with the forum state must be such that [it] “should
reasonably anticipate being haled into court” in the forum state.
Latshaw v. Johnston, 167 F.3d 208, 211 (5th Cir. 1999) (footnotes omitted). To determine
whether exercising jurisdiction would satisfy traditional notions of fair play and substantial
justice, the court examines (1) the defendant’s burden, (2) the forum state’s interests, (3) the
plaintiff’s interests in convenient and effective relief, (4) the judicial system’s interest in
efficient resolution of controversies, and (5) the states’ shared interest in fundamental social
policies. Ruston Gas Turbines, Inc. v. Donaldson Co., 9 F.3d 415, 421 (5th Cir. 1993).

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A defendant’s contacts with the forum may support either specific or general
jurisdiction over the defendant. Mink, 190 F.3d at 336. “For the court properly to assert
specific personal jurisdiction, the defendant must have ‘purposefully directed’ [its] activities
at residents of the forum, and the litigation must result from alleged injuries that ‘arise out
of or relate to’ the defendant’s activities directed at the forum.” Archer & White, Inc. v.
Tishler, 2003 WL 22456806, at *2 (N.D. Tex. Oct. 23, 2003) (Fitzwater, J.) (citing Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985); Helicopteros Nacionales de Colombia,
S.A. v. Hall, 466 U.S. 408, 414 (1984)). “General jurisdiction exists when a defendant's
contacts with the forum state are unrelated to the cause of action but are ‘continuous and
systematic.’” Id. (citations omitted).
“The district court usually resolves the jurisdictional issue without conducting a
hearing.” Ham v. La Cienega Music Co., 4 F.3d 413, 415 (5th Cir. 1993) (footnote omitted).
When a court rules on a motion to dismiss for lack of personal
jurisdiction without holding an evidentiary hearing, it must
accept as true the uncontroverted allegations in the complaint
and resolve in favor of the plaintiff any factual conflicts posed
by the affidavits. Therefore, in a no-hearing situation, a plaintiff
satisfies [its] burden by presenting a prima facie case for
personal jurisdiction.
Latshaw, 167 F.3d at 211 (footnotes omitted). “This liberal standard, however, does not
require the court to credit conclusory allegations, even if they remain uncontradicted.”
Panda Brandywine Corp. v. Potomac Elec. Power Co., 2000 WL 35615925, at *2 (N.D. Tex.
Sept. 15, 2000) (Fitzwater, J.) (citing Felch v. Transportes Lar-Mex SA DE CV, 92 F.3d 320,
326 n. 16 (5th Cir. 1996)), aff’d, 253 F.3d 865, 869 (5th Cir.2001) (per curiam) (affirming,
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inter alia, this conclusion).
III
A
The due process inquiry begins with a determination of whether Sefar has sufficient
minimum contacts with the forum state of Texas to support either general or specific
jurisdiction. See Mink, 190 F.3d at 336. Azteca has the burden of establishing Sefar’s
minimum contacts. See Stuart, 772 F.2d at 1192.
Azteca contends that the court may have general jurisdiction over Sefar. Azteca
maintains that Sefar’s active recruiting within the state of Texas and history of doing
business with Azteca in Texas suggests that the stringent test for general jurisdiction may be
satisfied. The court disagrees.
General jurisdiction allows a court to exercise personal jurisdiction over a
defendant even when the defendant’s contacts with the forum state are unrelated to the cause
of action. See Mink, 190 F.3d at 336. For a court to exercise general jurisdiction, a
defendant’s contacts must be “continuous and systematic.” Id. (citations omitted). General
jurisdiction over a foreign corporation is proper “only when the corporation’s
affiliations with the State in which suit is brought are so constant and
pervasive

‘as

to

render

[it]

essentially

at

home

in

the

forum

State.’”

Daimler AG v. Bauman, ___ U.S. ___, 134 S.Ct. 746, 751 (2014) (alteration in original)
(quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)).
Although Sefar has conducted business with Azteca for many years, its contacts with
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the forum state are not “continuous and systematic.” Archer, 2003 WL 22456806, at *2.
Sefar is not incorporated in Texas, does not have its principal place, or any place, of business
in Texas, has no manufacturing facilities in Texas, owns no property in Texas, has never
designed any products specifically for the market in Texas, and only has 3% of annual sales
attributable to Texas. Thus the court concludes that it does not have general jurisdiction over
Sefar. The court will therefore turn to whether Azteca has established that the court can
exercise specific jurisdiction.
B
Azteca’s amended complaint alleges that “[t]he harm to Plaintiffs caused by
Defendants’ actions also occurred in Texas and elsewhere.” Am. Compl. 3, ¶ 7. Sefar denies
this, contending that “[t]he screens at issue were sold by Sefar to GWM in Kansas and then
sold to Azteca by GWM.” D. Mot. to Dis. 2, ¶ 4. In its response to Sefar’s motion to
dismiss, Azteca explicitly alleges for the first time that “[a]mong the screens at issue in this
case are those that were contracted for, sold, and shipped by Sefar to Azteca’s Texas Plants.”
P. Resp. Br. 9, ¶ 22. Azteca supports this allegation with an affidavit from Azteca’s
Corporate Administrative Manager, who avers that, “[b]ased on my personal knowledge . .
. among the sifter screens Sefar supplied, sold and shipped to Azteca’s Texas plants were
some of the defective screens that are at issue[.]” P. App. 16-17, ¶ 11.
Because in a no-hearing situation the court in deciding a Rule 12(b)(2) motion to
dismiss “must accept as true the uncontroverted allegations in the complaint and resolve in
favor of the plaintiff any factual conflicts posed by the affidavits,” the court must accept that
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at least some of the sifter screens at issue in this case are those that Sefar supplied, sold, and
shipped to Azteca’s Texas plants, and that Sefar may have caused harm to Azteca in Texas
through these actions. See Latshaw, 167 F.3d at 211. This is sufficient to make a prima facie
showing that Sefar “‘purposefully directed’ [its] activities at residents of the forum, and the
litigation . . . result[ed] from alleged injuries that ‘arise out of or relate to’ [Sefar’s] activities
directed at the forum.” Archer, 2003 WL 22456806, at *2 (citing Burger King, 471 U.S. at
472).
Although, according to the amended complaint, Azteca’s claims for strict product
liability and negligence appear to be based primarily on injuries that occurred outside of
Texas, the court is not asked to determine personal jurisdiction on an injury-specific level.
Were this the proper inquiry, this court might not have personal jurisdiction over Sefar for
the injuries that Azteca allegedly sustained in Kentucky. But specific personal jurisdiction
is a claim-specific inquiry. Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 274-75 (5th
Cir. 2006) (concluding that specific personal jurisdiction is a claim-specific inquiry requiring
plaintiffs to establish specific jurisdiction for each claim). Because Azteca has made a prima
facie showing of specific jurisdiction in Texas with respect to Azteca’s claims for strict
product liability and negligence, the fact that the injuries allegedly associated with these
claims also occurred in other states does not preclude this court from exercising specific
personal jurisdiction over Sefar. See McFadin v. Gerber, 587 F.3d 753, 761 (5th Cir. 2009)
(citing Calder v. Jones, 465 U.S. 783, 789-90 (1984) (explaining that even acts done outside
the state having consequences or effects within the state will suffice as a basis for
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jurisdiction)). Accordingly, Azteca has met its burden of making a prima facie showing that
the court has specific personal jurisdiction over Sefar.
IV
The court next considers whether requiring Sefar to litigate this suit in Texas comports
with “fair play and substantial justice.” Bearry v. Beech Aircraft Corp., 818 F.2d 370, 374
(5th Cir. 1987) (citation omitted).
Sefar “must present a ‘compelling case’ that jurisdiction is unreasonable and
incompatible with ‘fair play and substantial justice.’” Tempur-Pedic Int’l, Inc. v. Go Satellite
Inc., 758 F.Supp.2d 366, 377 (N.D. Tex. 2010) (Fitzwater, C.J.) (quoting Burger King, 471
U.S. at 477-78). “It is rare to say the assertion [of jurisdiction] is unfair after minimum
contacts have been shown.” Id. (quoting Wien Air Alaska, Inc. v. Brandt,195 F.3d 208, 215
(5th Cir. 1999) (alterations in original)). Sefar has not made the required showing of a
compelling case.
*

*

*

For the reasons explained, the court denies Sefar’s motion to dismiss under Rule
12(b)(2) for lack of personal jurisdiction.
SO ORDERED.
October 19, 2017.

_________________________________
SIDNEY A. FITZWATER
UNITED STATES DISTRICT JUDGE

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