Supreme Court of Texas
══════════
No. 21-0130
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The State of Texas,
Petitioner,
v.
Volkswagen Aktiengesellschaft,
Respondent
═══════════════════════════════════════
On Petition for Review from the
Court of Appeals for the Third District of Texas
═══════════════════════════════════════
~ consolidated for oral argument with ~
══════════
No. 21-0133
══════════
The State of Texas,
Petitioner,
v.
Audi Aktiengesellschaft,
Respondent
═══════════════════════════════════════
On Petition for Review from the
Court of Appeals for the Third District of Texas
═══════════════════════════════════════
JUSTICE DEVINE delivered the opinion of the Court, in which
Justice Lehrmann, Justice Boyd, Justice Busby, Chief Justice
Sudderth,1 and Justice Tijerina2 joined.
JUSTICE HUDDLE filed a dissenting opinion, in which Chief Justice
Hecht and Justice Bland joined.
The State of Texas and several local governments brought civil
actions to enforce state environmental laws against German automobile
manufacturers that intentionally evaded compliance with federal
emissions standards by embedding illegal, emissions-beating technology
in branded vehicles. The issue in this highly unusual
personal-jurisdiction dispute is whether Texas courts have specific
jurisdiction over the manufacturers based on their intentional post-sale
tampering with affected vehicles that were owned, operated, and
serviced in Texas.
After an affiliated, Virginia-based distributor independently sold
more than half a million affected vehicles nationwide, the
manufacturers developed software updates designed to further conceal
and perpetuate continued operation of the defeat-device technology.
Leveraging fake recall campaigns and routine service opportunities, the
manufacturers specifically targeted affected vehicles by vehicle
1 The Honorable Bonnie Sudderth, Chief Justice of the Court of Appeals
for the Second District of Texas, sitting for JUSTICE BLACKLOCK by commission
of the Honorable Greg Abbott, Governor of Texas, pursuant to section 22.005
of the Texas Government Code.
2The Honorable Jaime E. Tijerina, Justice of the Court of Appeals for
the Thirteenth District of Texas, sitting for JUSTICE YOUNG by commission of
the Honorable Greg Abbott, Governor of Texas, pursuant to section 22.005 of
the Texas Government Code.
2
identification number (VIN) and employed a distribution system under
their contractual control to install the updates in vehicles serviced in
Texas. The manufacturers released the software updates to servers in
Germany that were synchronized with the distributor’s stateside server,
which automatically made the updates available to the distributor’s
Texas dealerships for installation through the manufacturers’
proprietary system in the targeted vehicles. The distributor and its
dealerships were contractually required to fulfill the
manufacturer-initiated recall and service campaigns when, as, and how
the manufacturers directed.
In the civil-enforcement actions, the manufacturers have
contested personal jurisdiction on the basis that (1) any contacts with
Texas were solely by the distributor and dealerships and cannot be
imputed to the manufacturers and (2) any domestic contacts on the
manufacturers’ part targeted the United States as a whole, not Texas
specifically, because the contacts were undifferentiated in kind and
quality among the vast majority of states. The determinative question
is whether the manufacturers’ contacts with Texas, accomplished
through direct and indirect control over instrumentalities and
intermediaries, satisfy constitutional requisites to exercising specific
personal jurisdiction. They do.
The German manufacturers purposely structured their
relationships with the distributor and dealerships to retain control over
after-sale recalls and repairs and then used that control to tamper with
vehicles in Texas after the initial sale to consumers. The manufacturers
had—and exercised—the sole authority to initiate the recall and service
campaigns at issue and provided and approved deceptive content for
3
related customer and dealership messaging. Under the terms of
importer agreements, the distributor was contractually required to
deploy its dealership network to implement the recall and service
campaigns on vehicles the manufacturers had specifically identified,
including tens of thousands of cars owned and operated in Texas. The
distributor agreements also gave the manufacturers control over the
dealership network in those recall and service actions, and the dealers
used the manufacturers’ proprietary diagnostic system to install the
tampering software in Texas. Unlike myriad software updates that
might be accomplished in the ordinary course of consumer transactions
with downloads initiated by the consumer or without regard to the
consumer’s location, these contacts with Texas were not fortuitous or
accomplished by the unilateral actions of third parties.
We also do not agree that the manufacturers’ contacts were not
purposefully directed at Texas simply because the same actions were
also directed at other states. Personal jurisdiction is a forum-specific
inquiry, and a defendant’s contacts with other states do not negate
purposeful availment of this jurisdiction regardless of whether
out-of-state contacts are more, less, or exactly the same.3 Because we
agree with the trial court that the manufacturers are amenable to
specific personal jurisdiction in Texas, we reverse the court of appeals’
judgment and remand to the trial court for further proceedings.
3 See Luciano v. SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 10 (Tex.
2021).
4
I. Background
These consolidated interlocutory appeals arise from “Dieselgate,”
a highly publicized scandal in which foreign automobile manufacturer
Volkswagen Aktiengesellschaft (VW Germany) pleaded guilty in federal
court to three felony counts for designing and intentionally installing
parts and software to circumvent federal emissions standards by
altering the way motor vehicles sold in the United States operated
during emissions testing.4 Under federal law, “defeat devices” of this
nature are illegal,5 and motor vehicles equipped with such devices may
not be sold in any state.6 In defiance of the applicable regulatory
4 The facts pertaining to the Dieselgate scandal are essentially
uncontested and derive from the “Statement of Facts” incorporated into the
plea agreement between the United States Department of Justice and
VW Germany. As part of the plea agreement, VW Germany agreed it would
“neither contest the admissibility of, nor contradict” those stipulated facts “in
any proceeding.”
5Federal law provides that “[t]he following acts and the causing thereof
are prohibited”:
[F]or any person to manufacture or sell, or offer to sell, or install,
any part or component intended for use with, or as part of, any
motor vehicle or motor engine, where a principal effect of the
part or component is to bypass, defeat, or render inoperative any
device or element of design installed on or in a motor vehicle or
motor vehicle engine in compliance with regulations under this
subchapter, and where the person knows or should know that
such part or component is being offered for sale or installed for
such use or put to such use . . . .
42 U.S.C. § 7522(a)(3)(B); see also 40 C.F.R. §§ 86.1803-01 (defining a defeat
device), 18.1809-10–.1809-12 (prohibiting defeat devices), 86.1854-12
(prohibited acts).
6 See 42 U.S.C. §§ 7521(a)(4), 7525(a)(1), (a)(3)(A); see also id.
§ 7522(a)(3)(B).
5
requirements, VW Germany surreptitiously implanted defeat-device
technology on half a million domestic vehicles for nearly a decade7—first
to secure federal certifications necessary to sell the affected products in
the U.S. and then again during routine-service and fabricated-recall
campaigns initiated after those vehicles were already traversing
roadways nationwide, including in Texas. After-sale tampering was
employed to avoid mounting warranty expenses caused by defects in the
original defeat-device technology and served to further conceal the
artifice. In this opinion, we refer to automobiles equipped with
defeat-device technology as “Affected Vehicles.”
VW Germany implemented this unlawful scheme in concert with
its majority-owned subsidiary, Audi Aktiengesellschaft (Audi),8 and
through its wholly owned subsidiary, Volkswagen Group of America,
Inc. (VW America), among others. Like VW Germany, Audi is a German
car manufacturer incorporated under German law and headquartered
in Germany. VW America, which is incorporated in New Jersey and
headquartered in Virginia, serves as the exclusive importer and
distributor for both VW Germany and Audi automobiles in the United
States and its territories. In that capacity, VW America is responsible
for the importation, distribution, marketing, and sale of Volkswagen
and Audi products and is obligated to establish a network of authorized
7 The scheme, which involved both the initial sale of vehicles and
post-sale service tampering, was active from approximately May 2006 to
November 2015.
8 Audi is approximately 99.55% owned by VW Germany.
6
Volkswagen and Audi dealerships to carry out retail and after-sale
services.
VW Germany and Audi (collectively, the German manufacturers)
have separate “Importer Agreements” with VW America predating the
Dieselgate misconduct; those agreements remain in force today, having
been continuously renewed and amended on occasion. As a general
proposition, neither of the German manufacturers has a contractual
relationship with or direct control over any of the dealerships. Nor do
they instruct VW America in the operations of the dealership network;
that responsibility belongs exclusively to VW America.
But with regard to after-sale relationships with U.S. consumers,
the Importer Agreements require (1) VW America to “establish, develop
and maintain a competent, effective[,] and customer oriented after sales
service to be provided through its [dealerships]” and (2) its dealerships
“to perform campaign inspections and/or corrections for users of [the
manufacturers’ vehicles] including recall campaigns.” “Upon notice of a
recall or service campaign,” which may be initiated only by the German
manufacturers, “[VW America] and/or its [dealerships] shall” perform
warranty repairs or maintenance service “in accordance with [the
German manufacturers’] instructions, guidelines[,] and/or procedures.”9
These provisions of the Importer Agreements provide the German
manufacturers with direct and indirect control over VW America and
the dealerships for recall, warranty, and other service work.
As discussed in more detail below, after the initial sale of Affected
Vehicles by VW America and its dealers, the German manufacturers
9 Emphasis added.
7
actuated their retained control over recall and service work to further
tamper with the emissions-control systems on those vehicles. The
manufacturers’ plot to circumvent environmental protection laws
involved defeat devices installed both before and after the initial sale of
Affected Vehicles, but this appeal concerns only the manufacturers’
secondary tampering.
The entire scheme had its genesis in the enactment of stricter
federal emissions standards in 1998. Although implementation of the
new emissions standards occurred in phases, manufacturers were
required to be in full compliance beginning with model year 2007
vehicles. VW Germany has stipulated that, around 2006, certain of its
“supervisors” realized that the company “could not design a diesel
engine that would both meet the stricter U.S. . . . emissions standards
. . . and [also] attract sufficient customer demand in the U.S. market.”
So, rather than create and market “a diesel vehicle that could
legitimately meet the new, more restrictive” standards, VW Germany
and Audi contrived to deceive U.S. regulators and customers about the
ability of more than a dozen Volkswagen and Audi models to comply
with those standards.
To make it appear as if the Affected Vehicles met U.S. emissions
standards when, in fact, they did not, VW Germany “designed, created,
and implemented a software function to detect, evade and defeat U.S.
emissions standards”—that is, an illegal defeat device.10 VW Germany
10 The original defeat-device technology incorporated in Volkswagen
and Audi models with 2.0-liter engines functioned differently from the
defeat-device technology in models with 3.0-liter engines, but because the
post-sale tampering at issue here concerns only vehicle models with 2.0-liter
8
began by borrowing Audi’s original concept of the “dual-mode, emissions
cycle-beating software[.]” VW Germany’s iteration of the software,
which Audi tested for compatibility with its own vehicles, was designed
“to recognize whether the vehicle was undergoing standard U.S.
emissions testing” or was “being driven on the road under normal
driving conditions.” If the software detected that the vehicle was
undergoing emissions testing, the vehicle performed in a mode that
would satisfy U.S. emissions standards. If the software detected that
the vehicle was not being tested, it operated in a different mode that
reduced the effectiveness of its emission-control system and produced
“substantially higher” emissions during normal driving conditions.
Starting with model year 2009, the German manufacturers installed
defeat devices or caused defeat-device technology to be installed in
certain vehicles falsely marketed and sold in the United States as “clean
diesel” and “environmentally friendly.”
After a few years, Affected Vehicles throughout the United States
began to develop hardware failures. These vehicles “were not designed
to be driven for longer periods of time” in “testing mode,” and
VW Germany’s engineers began to suspect that the defeat devices
remained in test mode for too long, causing increased stress on the
exhaust system. Over time, this caused the diesel particulate filter in
Affected Vehicles to overheat and crack. The expensive repairs were
covered by the manufacturers’ warranties and executed by local
engines, we confine our discussion to the development and implementation of
that software and its updates.
9
Volkswagen and Audi dealerships in VW America’s dealership network,
including those in Texas.
Although VW America’s dealerships were charged with making
warrantied and recall repairs on Volkswagen and Audi vehicles, the
Importer Agreements ultimately placed the financial burden of those
repairs on the German manufacturers. The dealers paid the initial cost
of warrantied and recall repairs, but VW America would reimburse the
dealers for that work, and then, as required by the Importer
Agreements, the German manufacturers would reimburse VW America.
The German manufacturers, by practice, not by contract, made their
reimbursement payments to VW America in the aggregate for costs
incurred nationwide.
To reduce escalating warranty expenditures and further conceal
the defeat devices, the German manufacturers conspired to install
updated software in post-sale Affected Vehicles throughout the United
States, including Texas. To make this happen, they took two actions.
First, without disclosing the true purpose of the software updates, they
initiated voluntary recalls of Affected Vehicles so that software “fixes”
could be installed on each recalled vehicle.11 Second, they arranged for
the software to be updated when customers brought their cars in for
normal maintenance, again without disclosing the true purpose of the
updates.12 To identify which cars should receive the updates,
11 In re Volkswagen “Clean Diesel” Mktg., Sales Pracs., & Prods. Liab.
Litig., 959 F.3d 1201, 1208-09 (9th Cir. 2020) (recounting the facts stipulated
in the plea agreement consistent with the record in this Court).
12 Id.
10
VW Germany listed “in a specific system each and every VIN number of
those vehicles that [were] affected by the recall.” When targeted
vehicles were brought into local dealerships—either in response to the
recall or for other services—the software updates were installed via the
German manufacturers’ proprietary diagnostic system, which was
designed for use on a worldwide basis. The software was available for
these local updates via “automated download” after the manufacturers
uploaded the updates to a “mirror server” in Germany that was
“synchronized” with a “mirror server” VW America hosts in the United
States. As soon as the software was available on VW America’s server,
the manufacturers’ proprietary diagnostic system in each local
dealership had access to it and would “transmit” it into targeted vehicles
when presented for repair or service work. Before the German
manufacturers uploaded the software to the mirror servers,
VW America provided the manufacturers with a list of the dealers that
would receive the updated software, which included dealers in Texas.
At no point was the true purpose of the updated software
disclosed. Rather, “[i]n each scenario, the [German manufacturers]
deceptively told [federal] regulators and American consumers that the
software updates were intended to improve the operation of the
[Affected] Vehicles.”13 All told, the initiative targeted 28,898 specifically
identified Volkswagen and Audi vehicles in Texas, and of those targets,
the post-sale tampering software was installed at Texas dealerships on
23,316 vehicles—a fact the German manufacturers do not dispute. For
13 Id.
11
many of those vehicles, tampering occurred several years after the
initial sale.14
The jig was up about eight years after the German manufacturers
first conspired to ship Affected Vehicles to the United States. Around
that time, an “independent study . . . revealed that certain Volkswagen
vehicles emitted air pollutants at concentrations of up to approximately
40 times the permissible limit,” causing the Environmental Protection
Agency (EPA) to commence an investigation.15 While the investigation
was ongoing, and almost ten years after the deception’s inception, a
Volkswagen whistleblower informed federal regulators about the defeat
devices. Under increasing pressure, the car companies came clean about
the entire scheme.
The EPA pursued criminal charges against VW Germany for
violating the federal Clean Air Act. VW Germany pleaded guilty to
those charges and agreed to pay a criminal fine of $2.8 billion to the
federal government. The EPA also filed a civil-enforcement action
against the German manufacturers, VW America, and others. The civil
claims were settled in a series of partial consent decrees that allocated
$209 million to the State of Texas for environmental remediation,
$1.45 billion in relief for Texas consumers, and more than $92 million to
compensate Texas dealers.16 According to counsel for the German
14 Post-sale tampering generally occurred from 2014 to 2016 with
Affected Vehicle models dating back to 2009. Of the vehicles receiving the
software updates, 487 were Audi models.
15 Id. (internal quotation marks omitted).
16Volkswagen Aktiengesellschaft v. State, Nos. 03-19-00453-CV,
03-20-00022-CV, ___ S.W.3d ___, 2020 WL 7640037, at *2 (Tex. App.—Austin
12
manufacturers, “Texas and its residents stand to recover more than
$1.35 billion from the federal actions.”17
Notably, neither the plea agreement nor the consent decrees gave
the German manufacturers any express protection from similar lawsuits
by state or local governments. “To the contrary, each state expressly
reserved its ability to sue Volkswagen for damages,”18 and the State of
Texas did just that.
Initially, the State filed an environmental-enforcement action
against only VW America, Audi of America,19 and Porsche Cars North
America, Inc. (collectively, the American defendants), asserting
violations of the Texas Clean Air Act and environmental regulations and
seeking civil penalties and injunctive relief. After several Texas
counties did the same, the lawsuits were transferred to a multidistrict
litigation (MDL) pretrial court. In these proceedings, the parties refer
to claims based on the original “factory installation of defeat devices” on
Dec. 22, 2020) (Volkswagen AG). The extent of the German manufacturers’
total liability resulting from the federal proceedings is unclear, but it exceeds
$20 billion, including the $2.8 billion fine. See Volkswagen “Clean Diesel”
Mktg., 959 F.3d at 1209.
See Volkswagen AG, ___ S.W.3d at ___, 2020 WL 7640037, at *2.
17
Counsel made the same representation to this Court.
18 Volkswagen “Clean Diesel” Mktg., 959 F.3d at 1209 & n.10.
19 Audi of America is a wholly owned subsidiary of VW America.
According to the record, the entity is “used for accounting purposes[] and is not
engaged in the import or distribution of Audi vehicles. Audi vehicles are sold
to authorized Audi dealers in the United States by VW America under the
trade name . . . ‘Audi of America, Inc.’ No subsidiary of Audi is involved in the
import or distribution of Audi vehicles in the United States.”
13
Affected Vehicles as “original tampering” claims.20 They use the term
“recall tampering” to describe the “allegations that after the [A]ffected
[V]ehicles had been sold to consumers, the [German and American]
entities tampered with those vehicles through software updates to the
defeat devices that were installed at dealerships as part of nationwide
recall campaigns or when cars were brought in for servicing.”21
Before the State sued the German manufacturers, the American
defendants moved for summary judgment, arguing that the federal
Clean Air Act preempts claims under the Texas Clean Air Act. The State
filed a response in opposition to the summary-judgment motion and, on
the same day, added VW Germany and Audi as defendants in the
lawsuit. Shortly thereafter, the American defendants once again moved
for summary judgment based on preemption.22 The trial court granted
summary judgment as to the original-tampering claims but denied it as
to the recall-tampering claims.
The German manufacturers filed special appearances contesting
personal jurisdiction in Texas with respect to the after-sale recall- and
service-tampering claims, which were the only live claims remaining at
that time.23 The parties conducted discovery directed to the
20 Volkswagen AG, ___ S.W.3d at ___, 2020 WL 7640037, at *2.
21 Id. at *3.
The record does not reflect that the trial court ever ruled on the first
22
summary-judgment motion.
See TEX. R. CIV. P. 120a. The State’s Fourth Amended Petition, to
23
which the German manufacturers filed their First Amended Special
Appearance and First Amended Answer, alleges violations of the following:
TEX. HEALTH & SAFETY CODE § 382.085(b) (Texas Clean Air Act’s prohibition
14
jurisdictional issue, and after separate hearings without live testimony,
the trial court denied the special appearances. No findings of fact or
conclusions of law were requested or provided, so in this opinion, we
recount the evidence in the light most favorable to the trial court’s
jurisdictional ruling, as we must.24
Having lost on their jurisdictional challenges, the German
manufacturers perfected separate interlocutory appeals, which the
court of appeals consolidated for consideration.25 By then, the State had
ostensibly abandoned any argument that the German manufacturers
were subject to general jurisdiction in Texas. With the inquiry narrowed
to whether Texas courts may exercise specific jurisdiction over
VW Germany and Audi, a divided court of appeals reversed the trial
court’s order and dismissed the claims against the German
manufacturers.26
In finding personal jurisdiction lacking, the majority concluded
that VW Germany and Audi had not purposefully availed themselves of
the privilege of conducting activities in Texas because “[a]t most, the
evidence in the record establishes that [they] directed recall-tampering
on unauthorized emissions); TEX. WATER CODE §§ 7.101–.102 (penalty statutes
for violating the Texas Clean Air Act and environmental regulations); TEX.
WATER CODE § 7.032 (statute authorizing injunctive relief for violating the
Texas Clean Air Act and environmental regulations); and 30 TEX. ADMIN. CODE
§ 114.20(b), (e) (motor vehicle anti-tampering regulations). This petition was
the live pleading when the trial court ruled on the special appearances.
24See BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794-95
(Tex. 2002).
25 See TEX. CIV. PRAC. & REM. CODE § 51.014(a)(7).
26 Volkswagen AG, ___ S.W.3d at ___, 2020 WL 7640037, at *1.
15
conduct toward the United States as a whole, not to Texas specifically.”27
The dissent would have held that the German manufacturers are subject
to personal jurisdiction in Texas because even though they directed their
after-sale tampering “to the United States as a whole,” they necessarily
directed those activities to Texas as well.28 “To hold otherwise,” opined
the dissent, “is to hold that by targeting every state, a foreign
manufacturer is not accountable in any state.”29
After consolidating the VW Germany and Audi cases for briefing,
we granted the State’s petitions for review to consider, among other
things, whether a foreign defendant can be subject to specific
jurisdiction in this forum when its contacts with Texas are
undifferentiated from its contacts with other states.
II. Discussion
Texas courts may assert personal jurisdiction over a nonresident
defendant if (1) the Texas long-arm statute so provides and (2) the
exercise of jurisdiction “is consistent with federal and state due process
guarantees.”30 “Our long-arm statute reaches as far as the federal
constitutional requirements for due process will allow,”31 so Texas courts
27 Id. at *5.
28 Id. at *10 (Triana, J., dissenting).
29 Id.
30 Spir Star AG v. Kimich, 310 S.W.3d 868, 872 (Tex. 2010).
31Id. (internal quotation marks omitted); see BMC Software Belg., N.V.
v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002) (the long-arm statute “extends
Texas courts’ personal jurisdiction as far as the federal constitutional
requirements of due process will permit[, so] we rely on precedent from the
United States Supreme Court and other federal courts, as well as our own
16
may exercise personal jurisdiction over foreign defendants “having such
‘contacts’ with the forum [s]tate that ‘the maintenance of the suit’ is
‘reasonable[] in the context of our federal system of government’ and
‘does not offend traditional notions of fair play and substantial
justice.’”32 This “minimum contacts” inquiry is a “forum-by-forum” or
“sovereign-by-sovereign”33 analysis that examines “the nature and
extent of ‘the defendant’s relationship to the forum’”34 to determine
whether the defendant is amenable to general or specific jurisdiction.35
General jurisdiction—which is not alleged here—arises when a
defendant’s contacts with the forum state are so “continuous and
systematic” that the defendant is “essentially at home.”36 This kind of
personal jurisdiction allows courts to render a binding judgment against
a defendant even if the plaintiff’s claims neither arise from activities
State’s decisions, in determining whether a nonresident defendant has met its
burden to negate all bases of jurisdiction” (internal quotation marks and
citations omitted)); see also TEX. CIV. PRAC. & REM. CODE § 17.042 (Texas
long-arm statute).
32Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 141 S. Ct. 1017, 1024
(2021) (quoting Int’l Shoe Co. v. State of Wash., Off. of Unemployment Comp.
& Placement, 326 U.S. 310, 316-17 (1945)); see Searcy v. Parex Res., Inc., 496
S.W.3d 58, 66 (Tex. 2016) (“[F]ederal due process requirements shape the
contours of Texas courts’ jurisdictional reach[.]”).
33 J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 884 (2011)
(plurality opinion); accord Luciano v. SprayFoamPolymers.com, LLC, 625
S.W.3d 1, 10 (Tex. 2021) (citing Keeton v. Hustler Mag., Inc., 465 U.S. 770,
779-80 (1984)).
34Ford Motor Co., 141 S. Ct. at 1024 (quoting Bristol-Myers Squibb Co.
v. Superior Ct. of Calif., S.F. Cnty., 137 S. Ct. 1773, 1779 (2017)).
35 E.g., Spir Star AG, 310 S.W.3d at 872.
36 E.g., Luciano, 625 S.W.3d at 8; Searcy, 496 S.W.3d at 72.
17
conducted in the forum state nor “relate to the forum [s]tate or the
defendant’s activity there.”37 Under general-jurisdiction principles, the
cause of action “may concern events and conduct anywhere in the world,”
subject to certain “correlative limit[s].”38
“Specific jurisdiction is different: It covers defendants less
intimately connected with [the forum state], but only as to a narrower
class of claims.”39 Courts can exert specific jurisdiction over a
nonresident defendant when (1) the defendant engages in “some act by
which [it] purposefully avails itself of the privilege of conducting
activities within the forum [s]tate” and (2) the plaintiff’s claims “arise
out of or relate to” those forum contacts.40 This kind of personal
jurisdiction involves a “claim-by-claim”41 analysis that focuses on the
relationship between the defendant, the forum state, and the operative
facts of the litigation.42
A court’s authority to exercise jurisdiction over a nonresident
defendant is a question of law we review de novo.43 If the plaintiff meets
37 Ford Motor Co., 141 S. Ct. at 1024.
38 Id.
39 Id.
Id. at 1024-25 (2021) (alteration in original) (quoting Hanson v.
40
Denckla, 357 U.S. 235, 253 (1958), and Bristol-Myers, 137 S. Ct. at 1780); see
Luciano, 625 S.W.3d at 8-9.
41 Moncrief Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142, 150 (Tex.
2013).
42 Id.
E.g., Spir Star AG v. Kimich, 310 S.W.3d 868, 871 (Tex. 2010); BMC
43
Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002).
18
its initial burden to plead allegations sufficient to confer personal
jurisdiction, the burden shifts to the defendant to negate all
jurisdictional bases alleged.44 “When, as here, the trial court does not
issue findings of fact and conclusions of law, we imply all relevant facts
necessary to support the judgment that are supported by evidence.”45 “If
the parties present conflicting evidence that raises a fact issue, we will
resolve the dispute by upholding the trial court’s determination.”46
The controlling issue in this appeal is whether the relevant facts
give rise to specific jurisdiction over the German manufacturers.
Primarily, the parties debate whether the foreign defendants have any
contacts with Texas at all and, if so, whether those contacts satisfy the
“purposeful availment” requirement. The German manufacturers
essentially concede that, if minimum contacts exist, the exercise of
specific jurisdiction would comport with traditional notions of fair play
and substantial justice.47
A. Purposeful Availment
“The ‘touchstone of jurisdictional due process’ is ‘purposeful
availment.’”48 “At its core, the purposeful availment analysis . . .
44 BMC Software, 83 S.W.3d at 793; see TV Azteca v. Ruiz, 490 S.W.3d
29, 36 n.4 (Tex. 2016) (describing the burden-shifting process).
45 Moncrief Oil, 414 S.W.3d at 150.
46 TV Azteca, 490 S.W.3d at 36 n.4.
47See Moncrief Oil, 414 S.W.3d at 154-55 (“If a nonresident has
minimum contacts with the forum, rarely will the exercise of jurisdiction over
the nonresident not comport with traditional notions of fair play and
substantial justice.”).
48 TV Azteca, 490 S.W.3d at 45 (quoting Michiana Easy Livin’ Country,
Inc. v. Holten, 168 S.W.3d 777, 784 (Tex. 2005)).
19
determine[s] whether a nonresident’s conduct and connection to a forum
are such that it could reasonably anticipate being haled into court
there.”49 Whether a nonresident defendant has “purposefully availed
itself of the privilege of conducting activities in Texas” is guided by three
considerations:
“[O]nly the defendant’s contacts with the forum are relevant,
not the unilateral activity of another party or a third person”;
“The contacts relied upon must be purposeful,” not “random,
fortuitous, or attenuated”; and
The defendant “must seek some benefit, advantage[,] or profit
by availing itself of [Texas’s] jurisdiction.”50
“This analysis assesses the quality and nature of the contacts, not the
quantity.”51
The two somewhat novel purposeful-availment issues we consider
here are: (1) whether the German manufacturers are accountable for
forum-state contacts effectuated through legally distinct intermediaries
that were acting at the German manufacturers’ direction and under
their contractual control with respect to the recall and service
campaigns; and (2) whether directing the same activity at multiple
states negates purposeful availment of an individual state absent other,
more differentiated, conduct directed to that forum. We resolve both
issues favorably to the trial court’s jurisdictional ruling and hold that
the German manufacturers’ after-sale recall- and service-tampering
49 Moncrief Oil, 414 S.W.3d at 152.
50 Id. at 151.
51 Id.
20
activities give rise to sufficient minimum contacts to sustain specific
personal jurisdiction.52
B. Minimum Contacts
Citing our decisions in Spir Star AG v. Kimich53 and Luciano v.
SprayFoamPolymers.com, LLC,54 the State argues that, despite lacking
a physical presence in Texas, the German manufacturers conducted
activities in Texas that are sufficient to sustain the exercise of specific
personal jurisdiction. The State does not rely on alter ego or
veil-piercing theories to fuse the German manufacturers with VW
America or the local dealerships. Instead, the State asserts that the
German manufacturers affirmatively used their control over
VW America and its local dealerships to carry out after-sale recall- and
service-tampering campaigns in Texas that violated our laws and, in
doing so, established contacts with Texas that are directly attributable
to the foreign defendants. These contacts, the State says, are no mere
fortuity but rather an orchestrated and intentional scheme, and because
the contacts were made at the German manufacturers’ behest and under
their direction, they do not derive from the unilateral activity of
VW America, the local dealerships, the State, or its residents. Arguing
to the contrary, the German manufacturers contend that the State has
not shown that the German manufacturers themselves, as opposed to
52 Although the State argues that sufficient “plus” factors exist even as
to the initial sales, we need not consider that argument.
53 310 S.W.3d 868 (Tex. 2010).
54 625 S.W.3d 1 (Tex. 2021).
21
VW America, have “specifically targeted” Texas or taken any steps
purposefully directed towards the Texas market.
We agree with the State that the German manufacturers have
established contacts with Texas by using their direct contractual control
over VW America and their direct and indirect contractual control over
the dealerships. The German manufacturers structured their business
relationships so that neither VW America nor the dealerships had
control over how the Affected Vehicles were modified by the software
updates that occurred inside this state. The record bears evidence that:
The German manufacturers had the sole authority to initiate and
direct after-sale recall and service campaigns;
The German manufacturers used that authority to initiate and
direct recall and service tampering of specifically identified
vehicles that were owned, operated, and serviced in Texas;
VW Germany developed the tampering software based on Audi’s
original design; Audi contributed to the connivance and software
development by testing the updates for compatibility with Audi
cars; both manufacturers caused the defeat-device software to be
uploaded to “mirror servers” that “automated” downstream
delivery to the point of installation in Texas; and before deploying
the software to the mirror servers, both manufacturers knew
which local dealerships would receive the updates;
The software was installed in Texas vehicles using the German
manufacturers’ proprietary diagnostic system;
VW America was contractually required to perform recall and
service campaigns, and it did so, at the manufacturers’ directive
and in accordance with their instructions;
VW America claims that it was an unwitting dupe that knew
nothing about either the original tampering or the recall and
service tampering, but whether that is true or not, the record
22
bears evidence that its servers were a mere conduit for passing
the manufacturers’ software updates through to the local
dealerships;
As mandated by the Importer Agreements, VW America caused
its dealerships to install the software updates on behalf of and at
the initiation, direction, and instruction of the German
manufacturers;
As mandated by the Importer Agreements,Texas dealerships
installed the software updates in the targeted vehicles in
accordance with the manufacturers’ instructions;
VW Germany supplied, and Audi approved, false messaging
about the purpose of the recalls and software updates, which
VW America was obligated to disseminate to dealerships and
customers, including those in Texas;55 and
The German manufacturers reimbursed the local dealers, by and
through VW America, for the manufacturer-mandated after-sale
services physically rendered to customers in Texas.
While personnel at VW America’s Texas dealerships may have “clicked
the button” to download the tampering software to the Affected Vehicles,
the process was essentially put into unstoppable motion by the
manufacturers and did not derive from unilateral or independent action
of VW America, the dealerships, or their customers. By directing an
affiliated importer/distributor to carry out the recall and service
55 VW America drafted letters to customers, as well as “documents that
would communicate the change or the field fix to the dealerships,” but
information in the customer letter came from a campaign data sheet
VW Germany prepared. For example, in one customer letter, in answer to the
question “What is the issue, and what will we do?”, VW Germany provided text
falsely stating that “the vehicle engine’s management software has been
improved to assure your vehicle’s tailpipe emissions are optimized and
operating efficiently—well beyond given government standards.”
23
campaigns—knowing the importer/distributor and the local dealerships
were contractually obligated to do so when, as, and how instructed—the
German manufacturers purposefully availed themselves of the Texas
market to consummate their illegal scheme.
Whether the German manufacturers’ purposeful actions are
characterized as direct or indirect contacts with Texas is, as the State’s
counsel put it, a “metaphysical” distinction without a difference to the
outcome of this case.56 The personal-jurisdiction analysis does not
depend on “mechanical tests” but on a qualitative assessment of any
relevant conduct demonstrating purposeful availment.57 If, as all agree,
the core inquiry is whether the German manufacturers could reasonably
anticipate being haled into a Texas court, that standard is met in this
unprecedented case based on evidence of (1) the German manufacturers’
intentional conduct; (2) their knowing use of an established and
preexisting distribution system—which they controlled in the relevant
way—to bring their jointly developed software to Texas to alter the
56 See Spir Star AG v. Kimich, 310 S.W.3d 868, 874 (Tex. 2010)
(“[P]urposeful availment of local markets may be either direct (through one’s
own offices and employees) or indirect (through affiliates or independent
distributors).”).
57 Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478 (1985) (“The Court
long ago rejected the notion that personal jurisdiction might turn on
‘mechanical’ tests.”); Int’l Shoe Co. v. State of Wash., Off. of Unemployment
Comp. & Placement, 326 U.S. 310, 319 (1945) (“[T]he criteria by which we mark
the boundary line between those activities which justify the subjection of a
corporation to suit, and those which do not, cannot be simply mechanical or
quantitative. . . . Whether due process is satisfied must depend rather upon
the quality and nature of the activity in relation to the fair and orderly
administration of the laws which it was the purpose of the due process clause
to insure.”).
24
Affected Vehicles post-sale; (3) the “automated download” of the
software through a conduit server for installation on targeted Texas
vehicles; and (4) use of the manufacturers’ proprietary diagnostic system
to install the software in Texas. The purposefulness of those forum
contacts is not diminished in any way by the pervasiveness of the
manufacturers’ recall-tampering scheme.
1. The German Manufacturers’ Contacts
The notion that a defendant may submit to a forum’s jurisdiction
without physically entering the forum state is, of course,
“unexceptional.”58 A paradigmatic example is when “manufacturers or
distributors ‘seek to serve’ a given [s]tate’s market.”59 In such
circumstances, courts often rely on “metaphors” as proxies for the
purposeful-availment inquiry.60 In this case, the State asserts that the
German defendants are amenable to jurisdiction in Texas under a
“stream-of-commerce-plus” theory61 and also based on purposeful
conduct designed to obstruct state law.62 We find both concepts
informative.
Under a stream-of-commerce-plus framework, “‘a nonresident
who places products into the “stream of commerce” with the expectation
58 J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 882 (2011)
(plurality opinion).
59 Id.
60 Id. at 881-82.
61 See Spir Star, 310 S.W.3d at 873 (explaining that our precedent
generally follows this stream-of-commerce-plus theory).
62See Nicastro, 564 U.S. at 880 (plurality opinion) (“As a general rule,
the sovereign’s exercise of power requires some act by which the defendant
25
that they will be sold in the forum state’ may be subject to personal
jurisdiction in the forum.”63 In contrast, mere foreseeability that a
product might ultimately end up in a particular forum does not alone
constitute purposeful availment.64 When the stream of commerce only
fortuitously deposits a product in the forum state, a nonresident
manufacturer will be subject to the forum’s jurisdiction only if additional
conduct—often referred to as a “plus factor”—evinces the
manufacturer’s intent to serve that market.65 This analytical construct
is frequently used in products-liability cases to determine whether
specific jurisdiction exists.66 When a nonresident manufacturer has no
knowledge, care, or control over where a product ends up, this and other
courts require some “plus factor” to establish purposeful availment.
Examples include “marketing the product through a distributor who has
agreed to serve as the sales agent in the forum [s]tate” or “creating,
‘purposefully avails itself of the privilege of conducting activities within the
forum [s]tate, thus invoking the benefits and protections of its laws,’ though in
some cases, as with an intentional tort, the defendant might well fall within
the [s]tate’s authority by reason of his attempt to obstruct its laws.” (citations
omitted) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958))).
63TV Azteca v. Ruiz, 490 S.W.3d 29, 46 (Tex. 2016) (emphasis added)
(quoting Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 576-77 (Tex.
2007)).
64 E.g., CSR Ltd. v. Link, 925 S.W.2d 591, 595 (Tex. 1996)
(“[F]oreseeability alone will not support personal jurisdiction. The defendant
must take an action ‘purposefully directed toward the forum state’ to be subject
to the jurisdiction of its courts.” (emphasis added) (quoting Asahi Metal Indus.
Co. v. Superior Ct. of Cal., Solano Cnty., 480 U.S. 102, 112 (1987) (plurality
opinion))).
65 Asahi, 480 U.S. at 112 (plurality opinion).
66 E.g., CMMC v. Salinas, 929 S.W.2d 435, 440 (Tex. 1996).
26
controlling, or employing the distribution system that brought the
product into the forum state.”67
Unlike the initial sales of Affected Vehicles, which might invoke
the stream-of-commerce-plus framework, this case does not involve a
typical stream-of-commerce scenario. With respect to the
recall-tampering claims at issue here, Affected Vehicles were already in
Texas when the German defendants reached in to modify those vehicles
in ways that allegedly violate state law. But even though this is not a
stream-of-commerce case, “plus” factors we have recognized are
informative and strikingly similar to how the German manufacturers’
defeat-device software updates and recall and service messaging were
brought to Texas dealers and consumers.
In Spir Star, a products-liability case, we employed a
stream-of-commerce-plus analysis in holding that a foreign
manufacturer was amenable to specific jurisdiction in Texas because it
had marketed its product through an independent distributor who
“agreed to serve as the sales agent” in Texas.68 We observed that, “[j]ust
as manufacturers cannot escape liability for defective products by
selling them through a subsidiary or distributor, neither can they avoid
jurisdiction related to such claims by the same means.”69
67 Luciano v. SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 10, 12 (Tex.
2021).
Spir Star AG v. Kimich, 310 S.W.3d 868, 875 (Tex. 2010) (“[B]y
68
‘marketing [its] product through a distributor who has agreed to serve as the
sales agent in the forum state,’ [the manufacturer] has met [the] ‘additional
conduct standard.’”).
69 Id.
27
Likewise, in Luciano, we held that an out-of-state manufacturer
was subject to specific jurisdiction in Texas because it employed an
independent-contractor sales agent who served as the manufacturer’s
“boots on the ground” in marketing and selling its products in Texas.70
In finding specific jurisdiction existed over the out-of-state
manufacturer, the “quality and nature” of the salesman’s role evinced
the defendant’s “‘intent or purpose’ to target the Texas market.”71 As in
Spir Star, our holding in Luciano affirms that acting through a
“distributor-intermediary” or an agent with “boots on the ground” to
intentionally target Texas as the marketplace for a product “provides no
haven from the jurisdiction of a Texas court.”72
Analogous conduct happened here, and the same result obtains.
The plain and express terms of the Importer Agreements grant the
German manufacturers control over both VW America and its network
of dealerships, including those in Texas, for purposes of carrying out
recall and service campaigns. Neither VW America nor the dealerships
had discretion to initiate or refuse to implement a recall or service
campaign. When the German manufacturers initiated those campaigns,
VW America was required to fall in line at their say-so and to compel
the dealerships to do the same. Indeed, the German manufacturers
have admitted that they had the exclusive prerogative to institute a
recall.
70 625 S.W.3d at 12.
71 Id.
72 Id.; Spir Star, 310 S.W.3d at 871.
28
Importantly, the Importer Agreements also specifically and
directly compel local Volkswagen and Audi dealerships to perform recall
and service campaigns “in accordance with [the German
manufacturers’] instructions, guidelines[,] and/or procedures.”73
Although the German manufacturers’ software updates and
instructions for conducting the after-sale tampering may have passed to
the dealerships through VW America, that circumstance did not
displace the German manufacturers’ actual and contractual control over
the entire scheme and each level of the distribution stream. Consistent
with the terms of the Importer Agreements and the testimony of
VW Germany’s corporate representative, VW America’s corporate
representative described the subsidiary as a mere “passthrough
department given information by [VW Germany]” about recall and
service campaigns, noting the company provided required signatures for
relevant documents without always having the information necessary to
ascertain whether the documents’ contents were true and correct. After
developing the software updates and deploying them for downstream
delivery, the German manufacturers used the dealerships as their
“boots on the ground” for after-sale recall- and service-campaign
purposes in two ways: (1) by issuing directives, instructions, and
73The Importer Agreements do not distinguish between the German
manufacturers’ control over VW America and its “Contractual Enterprises,”
requiring that “[VW America] and/or its Contractual Enterprises shall
[perform], in accordance with [the German manufacturers’] instructions,
guidelines[,] and/or procedures . . . warranty repairs and/or service and repair
Contractual Products.” (Emphasis added.) The agreements define “Contractual
Enterprises” as the dealers authorized to distribute, sell, or service the
manufacturers’ vehicles.
29
procedures that both VW America and the dealerships were
contractually obligated to obey and (2) by providing the proprietary
diagnostic system through which each Texas dealership downloaded and
installed the tampering software into Affected Vehicles.74
We acknowledge, as we must, that parent and subsidiary
corporations are presumed to be separate from one another.75
Accordingly, to “ascribe one corporation’s actions to another by
disregarding their distinct corporate entities” or to “‘fuse’ the parent
company and its subsidiary for jurisdictional purposes, the plaintiff[]
must prove the parent controls the internal business operations and
74 See Luciano, 625 S.W.3d at 12 (noting the “reality” that the foreign
manufacturer had taken purposeful steps to “tap[] into the local market” using
an independent “sales agent” as its “boots on the ground”); see also, e.g., Cmty.
Health Sys. Pro. Servs. Corp. v. Hansen, 525 S.W.3d 671, 691 (Tex. 2017)
(explaining that an agency relationship exists if the agent has consented to act
on the principal’s behalf and subject to the principal’s control and the principal
has authorized the agent to act on his behalf); Wilburn v. Valliance Bank &
Coleman & Patterson LLC, No. 05-14-00965-CV, 2015 WL 9281271, at *3 (Tex.
App.—Dallas Dec. 21, 2015, no pet.) (mem. op.) (observing that “[a]n agency
relationship is created” under an actual-authority theory “when the principal:
(1) intentionally confers authority on the agent; (2) intentionally allows the
agent to believe he has authority; or (3) allows the agent to believe that he has
authority to act by lack of due care” on the principal’s part); Gonzales v. Am.
Title Co. of Hous., 104 S.W.3d 588, 593 (Tex. App.—Houston [1st Dist.] 2003,
pet. denied) (“An agent is a person or entity who (1) is authorized to act for
another and (2) is subject to the control of the other.”).
75 BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 798 (Tex.
2002); see Hargrave v. Fibreboard Corp., 710 F.2d 1154, 1159 (5th Cir. 1983)
(“Generally, a foreign parent corporation is not subject to the jurisdiction of a
forum state merely because its subsidiary is present or doing business there;
the mere existence of a parent–subsidiary relationship is not sufficient to
warrant the assertion of jurisdiction over the foreign parent.”); id. at 1161
(explaining that a Texas parent company’s contacts could not be imputed to
the foreign subsidiary because the subsidiary and parent maintained “a degree
of corporate separation that was more than superficial”).
30
affairs of the subsidiary” to a degree “greater than that normally
associated with common ownership and directorship.”76
In this case, however, we need not disregard corporate
separateness or fuse the intermediaries with the German
manufacturers based on alter ego or any other veil-piercing theory to
give effect to the contractual relationship the parties designed with
regard to the specific mechanism by which the wrongful conduct
occurred in Texas. The German manufacturers’ control over the entire
scheme—control granted and exercised by them under the Importer
Agreements—allowed them to perpetrate a fraud on this state and its
citizens under the guise of recall and service campaigns. While the
German manufacturers could have organized their business
relationships to insulate themselves from forum-state contacts, they did
not do so with respect to the actions that form the basis of the State’s
claims here. They cannot now use their mere passthrough department
as a “haven from the jurisdiction of a Texas court.”77
2. Purposeful, Not Fortuitous
This brings us to the question of whether the German
manufacturers can avoid personal jurisdiction in Texas merely because
the after-sale tampering activities they controlled were part of a
76BMC Software, 83 S.W.3d at 798-99. “[T]he evidence must show that
the two entities cease to be separate so that the corporate fiction should be
disregarded to prevent fraud or injustice.” Id. at 799.
77Spir Star, 310 S.W.3d at 871, 874 (“The issue is not . . . whether [the
subsidiary’s] actions in Texas can be imputed to [the foreign parent company].
Rather, our concern is with [the parent’s] own conduct directed toward
marketing its products in Texas.”).
31
nationwide effort to cause local dealerships to install the defeat-device
software in all targeted vehicles after-sale.
As a necessary corollary to the principle that jurisdiction exists
only when the defendant’s forum contacts are purposeful, contacts that
are “random, isolated, or fortuitous” are not sufficient to hale a
nonresident defendant into the jurisdiction.78 In other words, for Texas
courts to exercise specific jurisdiction over the German manufacturers,
their contacts with Texas cannot be accidental, mere happenstance, or
simply foreseeable.
Here, there was no happenstance to the contacts with Texas;
rather, the German manufacturers’ conduct reflects an intent to avail
themselves of every market Affected Vehicles were in at the time of the
recall and service campaigns—including Texas. The targets were
already here, so the German manufacturers had to direct their conduct
here to accomplish their mission. And because “personal jurisdiction
requires a forum-by-forum” analysis,79 we look only to the German
manufacturers’ behavior directed toward Texas, not their behavior
directed elsewhere.80 The logical consequence is that the lack of
differentiation in the nature and kind of conduct directed at other
jurisdictions does not negate the German manufacturers’ purposeful
availment of this one.
Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 785
78
(Tex. 2005) (quoting Keeton v. Hustler Mag., Inc., 465 U.S. 770, 774 (1984)).
79J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 884 (2011)
(plurality opinion).
80 See Luciano v. SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 10 (Tex.
2021).
32
The defendant need not single Texas out in some unique way to
satisfy constitutional dictates. To hold that a nonresident who has
directed activity to every state is not amenable to jurisdiction in any
state would unduly constrain the authority of state courts to hold
nonresidents accountable for their in-state conduct and would convert
the specific-personal-jurisdiction analysis into a wholly subjective
inquiry into the defendants’ state of mind.81 The potential ramifications
prove the fallacy of the German manufacturers’ “nationwide targeting”
argument with respect to wrongful conduct that actually occurred in
Texas. For example, if a malfunction in the defeat-device software
updates had caused a Texas car owner to suffer personal injuries in
Texas, the German manufacturers’ jurisdictional theory would leave
plaintiffs with no avenue of redress in any jurisdiction because none
would have jurisdiction despite—and indeed because of—the
automakers’ pervasive scheme. The state tort claims also could not be
brought in any federal court because jurisdiction there depends on
jurisdiction in the forum state.82 Neither the federal nor the state
81See Moncrief Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142, 147 (Tex.
2013) (“[W]hat the parties thought, said, or intended is generally irrelevant to
their jurisdictional contacts. Regardless of the defendants’ subjective intent,
their Texas contacts are sufficient to confer specific jurisdiction over the
defendants.”).
82See, e.g., Walk Haydel & Assocs. v. Coastal Power Prod. Co., 517 F.3d
235, 242 (5th Cir. 2008) (“A federal district court has personal jurisdiction over
a nonresident defendant to the same extent as a state court in the state in
which the district court is located.”); Sawtelle v. Farrell, 70 F.3d 1381, 1387
(1st Cir. 1995) (“It is well established in diversity cases that the district court’s
personal jurisdiction over a nonresident defendant is governed by the forum’s
long-arm statute.” (internal quotation marks omitted)); Rambo v. Am. S. Ins.
Co., 839 F.2d 1415, 1416 (10th Cir. 1988) (observing that, in diversity cases, a
33
constitution requires us to adopt a rule insulating nonresident
defendants from personal jurisdiction arising from or related to their
Texas-based contacts merely because the defendant has targeted other
states in a similar manner. Rather, the critical inquiry is whether a
nonresident defendant has established sufficient contacts with Texas—
not whether those contacts are materially different from its contacts
with other states.
Our recent decision in Luciano bears this out. There, the
nonresident defendant had a greater number of contacts with
Connecticut than it had with Texas: it was formed, had its principal
place of business, “accept[ed] customers’ orders, approve[d] and
processe[d] orders, employ[ed] personnel, and receive[d] payment” in
Connecticut, while it merely sent a sales agent to Texas.83 Nonetheless,
we rejected the defendant’s argument that “its numerous contacts with
Connecticut ma[d]e specific jurisdiction in Texas improper.”84 “[T]he
contacts an entity forms with one jurisdiction do not negate its
purposeful contacts with another.”85 So too here: the fact that the
German manufacturers have contacts with other states or the United
States as a whole does not preclude them from having jurisdictionally
significant contacts with Texas.
federal court cannot exceed the jurisdictional reach of the courts of the forum
in which they sit); FED. R. CIV. P. 4(k) (providing the process for acquiring
personal jurisdiction in diversity cases).
83 Luciano, 625 S.W.3d at 7, 10 n.2.
84 Id. at 10.
85 Id. (citing Keeton v. Hustler Mag., Inc., 465 U.S. 770, 779-80 (1984)).
34
Our conclusion that differentiation among states is not required
for personal jurisdiction is supported by the United States Supreme
Court’s hallmark personal-jurisdiction decision in Keeton v. Hustler
Magazine, Inc.86 and is consistent with our personal-jurisdiction
precedent.
In Keeton, the defendant publisher distributed its magazine
nationwide.87 The Supreme Court nonetheless held that the forum state
could exercise personal jurisdiction over the defendant, and it did so
without regard to whether the defendant had availed itself of the forum
in a way that was distinct from its availment of other jurisdictions.88
The “circulation of magazines in the forum [s]tate [was] sufficient to
support an assertion of jurisdiction” without any consideration of
whether the extent of circulation was materially different from its
distribution throughout the United States.89
The sole focus in Keeton was on the forum-state contacts, with the
Supreme Court holding that “some 10 to 15,000 copies” of the magazine
sold in the forum state each month could not “by any stretch of the
imagination be characterized as random, isolated, or fortuitous.”90
Considering only the forum contacts, the Court viewed this as evidence
that the defendant “chose to enter the [forum state’s] market” and found
86 465 U.S. 770 (1984).
87 Id. at 774.
88 See id. at 775-81.
89 Id. at 773.
90 Id. at 772, 774.
35
it “sufficient to support an assertion of jurisdiction.”91 In this case,
Volkswagen and Audi dealerships in Texas—acting as the German
manufacturers’ cat’s paw92—performed recall or service actions on
23,316 specifically identified Affected Vehicles. Thousands of contacts
are certainly not isolated—indeed, a regular flow of activity continued
throughout the roughly two-year recall-tampering period.93
Nor were these contacts random or fortuitous. Even if the
German manufacturers were not subjectively focused on Texas to the
exclusion of other jurisdictions, their contacts reflect both an expectation
that the software updates would be deployed in Texas and a clear choice
to enter the Texas market where a substantial number of targeted
vehicles would be serviced. As we have explained, “what the parties
thought, said, or intended is generally irrelevant to their jurisdictional
contacts.”94 Rather, “the business contacts needed for specific personal
jurisdiction over a nonresident defendant ‘are generally a matter of
physical fact.’”95 Accordingly, we do not concern ourselves with whether,
91 Id. at 773-74, 779.
Colloquially, a “cat’s paw” is “one used by another as a tool,” “a person
92
used by another to do dangerous, distasteful, or unlawful work,” and a “dupe.”
MERRIAM-WEBSTER, https://www.merriam-webster.com/dictionary/cat%27s-p
aw (last visited May 3, 2023); COLLINS https://www.collinsdictionary.com/us/
dictionary/english/ cats-paw (last visited May 3, 2023).
Although only 487 were Audi models, that remains a significant
93
number of purposeful contacts.
94 Moncrief Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142, 147 (Tex.
2013).
Id. (quoting Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d
95
777, 791 (Tex. 2005)).
36
in directing VW America to carry out the recall and service campaigns,
the German manufacturers had Texas on their corporate minds.
The analysis in the Supreme Court’s plurality opinion in J.
McIntyre Machinery, Ltd. v. Nicastro96 does not compel a different
result. Nicastro, which we have cited for general propositions on a
handful of occasions, is factually and analytically distinguishable.
Nicastro is a products-liability case in which the United States Supreme
Court—in plurality and concurring opinions—concluded that a foreign
manufacturer had not purposefully availed itself of the New Jersey
market despite its intent, desire, and hope to serve the entire U.S.
market.97 In concluding that personal jurisdiction over the defendant
did not lie in New Jersey under a stream-of-commerce analysis,98 a
majority of the Court rejected the lower court’s ruling that a forum could
“exercise jurisdiction over a foreign manufacturer of a product so long as
the manufacturer ‘knows or reasonably should know that its products
are distributed through a nationwide distribution system that might
lead to those products being sold in any of the fifty states.’”99 In the
plurality’s view, the jurisdictional inquiry implicated two principles:
(1) “personal jurisdiction requires a forum-by-forum, or
96 564 U.S. 873 (2011) (plurality opinion).
97 Id. at 886.
98 Id. at 887.
99Id. (quoting Nicastro v. McIntyre Mach. Am., Ltd., 987 A.2d 575, 592
(N.J. 2010), rev’d, 564 U.S. 873 (2011)); id. at 890-91 (Breyer, J., concurring)
(quoting the same).
37
sovereign-by-sovereign, analysis,”100 and (2) in theory, a defendant “may
be subject to the jurisdiction of the courts of the United States but not
of any particular [s]tate” “[b]ecause the United States is a distinct
sovereign.”101
The plurality framed the jurisdictional question as “whether a
defendant has followed a course of conduct directed at the society or
economy existing within the jurisdiction of a given sovereign, so that the
sovereign has the power to subject the defendant to judgment
concerning that conduct.”102 And given the necessity of a forum-specific
analysis, the plurality found it irrelevant that the defendant “directed
marketing and sales efforts at the United States” because “the question
concerns the authority of a New Jersey state court to exercise
jurisdiction, so it is [the manufacturer’s] purposeful contacts with New
Jersey, not with the United States, that alone are relevant.”103 The
claim of jurisdiction in Nicastro rested on facts the plurality said “may
reveal an intent to serve the U.S. market, but they do not show that [the
manufacturer] purposefully availed itself of the New Jersey market.”104
The plurality opinion explains:
Respondent’s claim of jurisdiction centers on three facts:
[t]he [independent] distributor agreed to sell [the
100 Id. at 884 (plurality opinion); accord id. at 891 (Breyer, J.,
concurring) (noting that the established jurisdictional inquiry is whether “it is
fair, in light of the defendant’s contacts with that forum, to subject the
defendant to suit there”).
101 Id. at 884.
102 Id.
103 Id. at 885-86.
104 Id. at 886.
38
manufacturer’s] machines in the United States; [the
manufacturer’s] officials attended trade shows in several
States but not in New Jersey; and up to four machines
ended up in New Jersey. The British manufacturer had no
office in New Jersey; it neither paid taxes nor owned
property there; and it neither advertised in, nor sent any
employees to the State. Indeed, after discovery the trial
court found that the “defendant does not have a single
contact with New Jersey short of the machine in question
ending up in this state.”105
The German manufacturers suggest that the Nicastro plurality
opinion precludes consideration of forum contacts if the nonresident
defendant has targeted the U.S. market generally. This argument
misreads Nicastro, which presents the inverse scenario. Properly
construed, Nicastro reaffirms the forum-by-forum personal-jurisdiction
analysis.106 The plurality repudiated the lower court’s aggregation of
nationwide contacts and attribution of those contacts to a particular
state based on the foreign manufacturer’s desire to penetrate the entire
U.S. market and the mere foreseeability that its products could end up
in any of the fifty states.107 The situation there was the opposite of the
circumstances here, where the German manufacturers essentially seek
to negate forum contacts based on their similar contacts elsewhere.
Nicastro is further inapposite because, here, the German
manufacturers’ conduct rises above mere foreseeability. In both
Nicastro and the instant cases, legally distinct distributors
105 Id.
106 Id. at 884.
107 See id. at 879, 886.
39
independently marketed and sold the foreign defendants’ products
throughout the United States, and the foreign defendants had never
established a physical presence in the forum state. But in Nicastro, the
sale of one to four products through an independent distributor had been
the extent of the forum activity. Although foreseeability is a factor in a
stream-of-commerce-plus analysis, mere foreseeability that a product
sold in the United States might end up in a particular forum state is not
enough to subject the defendant to that state’s jurisdiction.108 A
defendant who places a product into the stream of commerce can be
charged only with foreseeing that the product might end up in the forum
state, and such foreseeability is not evidence of the purposefulness
required to “invok[e] the benefits and protections” of a forum’s laws or
take advantage of its market.109 That is why we and courts around the
country require “plus” factors in products-liability cases—to delineate
purposeful action directed at the forum state.110 The Nicastro
manufacturer might have foreseen—and even hoped—that its machines
would be sold in New Jersey, but the Supreme Court discerned no
evidence of additional conduct indicating the foreign defendant’s intent
108 E.g., CSR Ltd. v. Link, 925 S.W.2d 591, 595 (Tex. 1996)
(“[F]oreseeability alone will not support personal jurisdiction. The defendant
must take an action ‘purposefully directed toward the forum state’ to be subject
to the jurisdiction of its courts.” (emphasis added) (quoting Asahi Metal Indus.
Co. v. Superior Ct. of Cal., Solano Cnty., 480 U.S. 102, 112 (1987) (plurality
opinion))).
109Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 784
(Tex. 2005) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)).
110 See, e.g., CSR Ltd., 925 S.W.2d at 595.
40
to exploit the New Jersey market in connection with the initial sale of
products through a distributor.111
In contrast to the circumstances in Nicastro, the after-sale recall
and service campaigns initiated at the German manufacturers’ direction
on specifically identified vehicles goes far beyond a mere subjective
awareness that the campaigns might be conducted in Texas. It
demonstrates the German manufacturers’ intent to avail themselves of
the benefits and protections of each and every market in which the recall
and service campaigns were carried out. They did not simply anticipate
that those campaigns would have an effect in Texas—they intentionally
reached into this market with certainty that the fraudulent campaigns
would be carried out on vehicles that were already here.
The Nicastro plurality also recognized that, “in some cases, as
with an intentional tort, the defendant might well fall within the
[s]tate’s authority by reason of [the defendant’s] attempt to obstruct its
laws.”112 To the extent Nicastro has any bearing on the jurisdictional
analysis here, the Texas statutes and regulations the State alleges the
German manufacturers violated are explicitly applicable to vehicles
actually in use on Texas roadways.113 Among other things, those
111 J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 886 (2011)
(plurality opinion).
112 Id. at 880.
113 30 TEX. ADMIN. CODE § 114.20(b), (e); see TEX. HEALTH & SAFETY
CODE § 382.085(b) (“A person may not cause, suffer, allow, or permit the
emission of any air contaminant or the performance of any activity in violation
of this chapter or of any commission rule or order.”); TEX. WATER CODE § 7.101
(“A person may not cause, suffer, allow, or permit a violation of a statute within
41
regulations prohibit any person from “mak[ing] inoperable any system
or device used to control” motor vehicle emissions or from selling,
offering for sale, or using “any system or device which circumvents or
alters any system, device, engine, or any part thereof, installed by a
vehicle manufacturer to comply with the Federal Motor Vehicle Control
Program during actual in-use operation of a motor vehicle on Texas
roadways.”114
The foreign manufacturers’ conduct here—as described in the
federal plea agreement and the German manufacturers’ admissions—
was both intentional and obstructive, which at the very least heightens
the quality of their contacts with this forum. States, of course, have an
interest in protecting against torts that take place within their
jurisdiction, and “the Supreme Court has [also] recognized state
interests in protecting regulatory schemes[.]”115 Accordingly, in addition
to the “plus-factor” conduct of exerting control over the distribution
scheme that brought the corrupt software updates to Texas,116 Nicastro
the commission’s jurisdiction or a rule adopted or an order or permit issued
under such a statute.”).
114 30 TEX. ADMIN. CODE § 114.20(b), (e) (emphasis added).
115 Moncrief Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142, 152 (Tex.
2013) (citing Travelers Health Ass’n v. Virginia, 339 U.S. 643, 648 (1950), and
McGee v. Int’l Life Ins. Co., 355 U.S. 220, 223 (1957)).
116 Luciano v. SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 10 (Tex.
2021) (describing “creating, controlling, or employing the distribution system
that brought the product into the forum state” as a type of “additional conduct”
evidencing “‘an intent or purpose to serve the market in the forum [s]tate,’
whether directly or indirectly” (emphasis added) (quoting Asahi Metal Indus.
Co. v. Superior Ct. of Cal., Solano Cnty., 480 U.S. 102, 112 (1987) (plurality
opinion))); accord TV Azteca v. Ruiz, 490 S.W.3d 29, 46 (Tex. 2016) (quoting
Asahi, 480 U.S. at 112 (plurality opinion)).
42
suggests, if anything, that the German manufacturers could also be
within a Texas court’s authority by virtue of their intentional conduct
undertaken to obstruct regulations that govern emissions compliance for
vehicles operating on Texas roads.117 In our view, engaging the forum
with the specific intent to take actions to thwart the enforcement of an
applicable regulatory scheme could not be more purposeful.118
The fraudulent nature of the scheme also differentiates this case
from ordinary software updates that are consummated with consumer
consent or released for download without regard to where the consumer
is located or which product the updates target. The after-sale tampering
software the German manufacturers deployed was targeted to specific
end-user products, and downloading to the subject vehicles was
facilitated by misrepresentations and outright lies to dealers and
consumers about the nature and purpose of the recall and service work.
The record does not indicate that the owners or operators of Affected
Vehicles affirmatively consented to the installation of the defeat-device
117 See J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 880 (2011)
(plurality opinion); Travelers Health, 339 U.S. at 648 (recognizing the “state’s
interest in faithful observance” of its regulatory scheme by nonresidents).
118 In Michiana Easy Livin’ Country, Inc. v. Holten, we held that specific
jurisdiction would not lie based solely on whether the defendant’s conduct was
tortious, holding that the jurisdictional analysis must focus on the defendant’s
contacts with the forum itself. 168 S.W.3d 777, 791-92 (Tex. 2005). That is,
intent is not a substitute for the defendant’s actual contacts with the forum,
which, unlike questions about scienter, are generally a matter of physical fact.
But unlike Michiana, which involved alleged misrepresentations ostensibly
“directed at” a forum resident but otherwise occurring outside the forum, the
conduct that allegedly violates state law in this case actually occurred in Texas.
It is not a question of whether the State will succeed on the merits of its claims,
but whether the defendants made purposeful contacts with Texas as a matter
of physical fact.
43
software on their cars during recall or service work, but even if they did,
any such consent was fraudulently procured by the unilateral actions of
the defendants.
For these reasons, we cannot agree that the German
manufacturers’ contacts elsewhere nullify their contacts with Texas119
or that those Texas contacts are attributable to mere fortuity or the
unilateral acts of third parties.
3. Forum Benefit, Advantage, or Profit
Even so, nonresident defendants purposefully avail themselves of
a forum state’s jurisdiction only when they “seek some benefit,
advantage[,] or profit” from their contacts with the jurisdiction.120
“Jurisdiction is premised on notions of implied consent—that by
invoking the benefits and protections of a forum’s laws, a nonresident
consents to suit there. By contrast, a nonresident may purposefully
avoid a particular jurisdiction by structuring its transactions so as
neither to profit from the forum’s laws nor be subject to its
jurisdiction.”121
Both German manufacturers sought a benefit by availing
themselves of Texas’s jurisdiction—VW Germany perhaps more
obviously because it had a more direct financial incentive. By the terms
of its Importer Agreement, VW Germany bore the ultimate burden to
See Keeton v. Hustler Mag., Inc., 465 U.S. 770, 774 (1984); Michiana,
119
168 S.W.3d at 785.
120See Moncrief Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142, 151
(Tex. 2013).
121 Michiana, 168 S.W.3d at 785.
44
pay for all repairs covered by warranty and recall work for affected
Volkswagen vehicles. VW Germany reimbursed VW America for all
warrantied and recall work that local dealers undertook on Volkswagen
cars, including for the recall and service actions at issue in the
underlying litigation. In the same way, Audi was contractually
responsible for financing warranty and recall work and reimbursed
VW America for the recall and service actions the dealers performed on
Audi cars, but for some—or all—of the work at issue here, VW Germany
may have subsequently reimbursed Audi.
The after-sale tampering came about after diesel particulate
filters in Affected Vehicles with 2.0-liter engines began to crack due to a
malfunction in the defeat-device technology that had been installed in
the vehicles before their importation and sale by VW America. These
filters were covered by warranty, so VW Germany bore the ultimate
responsibility for covering the cost of replacing them, including those in
some affected Audi models. The German manufacturers initiated the
recall and service campaigns to prevent this damage to the filters and to
defray high costs associated with the repairs. According to the record,
the cost of replacing a single filter was over $1,000, and nationally,
VW Germany saved up to $525,000 per month in reduced warranty costs
as a result of the “fixes” effectuated by the software downloaded in the
after-sale tampering campaigns. VW Germany did not break down
those payments by state, so the record contains no evidence of what it
paid to reimburse warranty claims originating in Texas. Nonetheless,
after-sale tampering allowed VW Germany to save money by preventing
damage that would later require warranty repair; VW Germany sought
this benefit by initiating the recall and service campaigns for vehicles in
45
Texas—the second-largest market for sales of Affected Vehicles; and
reimbursable service work was performed on 23,316 cars at Texas
dealerships.
Audi may or may not have borne ultimate financial responsibility
for warranty claims of the specific part at issue here—it says it did not,
and the special-appearance record does not contradict that assertion—
so it did not benefit from the after-sale tampering in all the same
respects as VW Germany. But the record bears some evidence that Audi
nonetheless benefitted in several significant ways. The most obvious is
that Audi, like VW Germany, sought to prevent regulatory authorities
from discovering that some of its cars—including cars owned and
operated in Texas—did not comply with federal emissions standards so
it would not have to recall, replace, or otherwise be held accountable for
exporting illegal vehicles. Additionally, Audi, like VW Germany, would
have obtained nonmonetary benefits in Texas in the form of enhanced
relationships with consumers and the avoidance of adverse publicity. By
initiating campaigns to further conceal the defeat devices installed in
Affected Vehicles owned, operated, and serviced in Texas, VW Germany
and Audi availed themselves of the benefits and privileges of conducting
business activities in Texas. These contacts with Texas were not
accidental and, instead, allowed the German manufacturers to exploit
the Texas market to their benefit and advantage until the artifice was
uncovered.122 All three factors of the purposeful-availment analysis are
therefore satisfied.
122 See Hanson v. Denckla, 357 U.S. 235, 253 (1958); Retamco Operating,
Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338 (Tex. 2007).
46
4. Response to the Dissent
The dissent’s analysis misses the mark in several important
respects. First, the opinion focuses on initial vehicle sales and related
provisions of the Importer Agreements while neglecting the after-sale
recall and service campaigns and the contract provisions governing
them. This misstep leads the dissent’s analysis astray. The proper focus
is on the German manufacturers’ purposeful use of existing distribution
channels and an established control structure to bring a tainted
product—the defeat-device software updates—to specifically targeted
vehicles that were being serviced in Texas and operated on Texas
roadways.123 While the German manufacturers engaged in conduct
outside of Texas with regard to the after-sale tampering, as the dissent
says, there was nonetheless a direct line from the German
manufacturers to Texas through their chosen business structure. The
dissent’s assertion that “[u]nder today’s holding, any foreign
manufacturer directing its U.S. distributor to conduct a nationwide
recall will be subject to personal jurisdiction in Texas courts, regardless
of whether it targeted Texas,”124 is an obvious oversimplification that
ignores (1) the level and nature of control the German manufacturers
retained and exercised over both the recall campaigns and the service
campaigns and (2) the requirement of a causal nexus between the forum
123 The dissent’s rationale for absolving the German manufacturers of
their purposeful contacts with Texas is that they only conducted recall and
service campaigns on vehicles in Texas because of VW America’s “own decision
to target the Texas market for car sales in the first instance.” Post at 16 n.9,
18. VW America’s decisions about initial vehicle sales may have put the target
here, but the German manufacturers knowingly and purposefully shot at it.
124 Id. at 4.
47
contacts and the operative facts of the litigation, which narrows the class
of claims that could give rise to specific personal jurisdiction.
Second, the dissent is dead wrong in saying that (1) the record
bears no evidence that the German manufacturers controlled the means,
details, and manner of the wrongful conduct that was perpetrated in
Texas and (2) the Importer Agreements preclude the distributor and
dealers from acting as the manufacturers’ agents for purposes of the
recall and service campaigns. Because no findings of fact were issued,
we are obligated to view the record favorably to the trial court’s
jurisdictional rulings,125 and as we have described in some detail, the
record bears substantial evidence that the German manufacturers
controlled the means, details, and manner in which VW America and its
dealership network executed the recall and service campaigns.126 The
125 See BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex.
2002).
126Despite ample evidence to support an implied finding of the
manufacturers’ control over the distribution system, the distributors, and the
dealerships with regard to installation of the post-sale modifications to
Affected Vehicles in Texas, the dissent intimates that “the State’s own
admissions” prevent us from considering that evidence. See post at 20. The
dissent points to the State’s recently filed summary-judgment motion as
precluding the conclusion that the German manufacturers controlled the
means and details of the recall and service campaigns by arguing that
VW America “not only ‘arranged, managed, promoted, [and] advertised’ but
also ‘directed’ the recalls at Texas dealerships.” Id. But such arguments are
not inconsistent with the State’s position—and the manufacturers’
admissions—that the distributor was contractually obligated to undertake
such actions, and did do so, at the manufacturers’ direction. As VW Germany’s
corporate representative testified, when the manufacturer initiates a recall,
“everybody has to follow.” Rather than adhering to the applicable standard of
review, the dissent’s analysis views the record contrary to the trial court’s
ruling.
48
German manufacturers determined which vehicles would be tampered
with, how the tampering would occur, and what the dealers and
consumers would be told about the purpose of the recall and service
campaigns. Just as importantly, the German manufacturers provided
the means of implementation—not only the software updates
themselves but also the proprietary diagnostic system the dealers used
to identify the targeted vehicles and download the updates to those
vehicles when presented for recall or service work. The German
manufacturers uploaded the software onto their server, which was
“synchronized” with the distributor’s server, and then the software was
available by “automated download” for installation into specific vehicles
via the manufacturers’ proprietary diagnostic system. The record does
not show that VW America or the dealers had any control over whether
these automated actions occurred.127
This conclusion is further bolstered by the Importer Agreements,
which give the German manufacturers control over the execution of
But the dissent’s reliance on this filing is also troubling for other
reasons: (1) the motion is outside the special-appearance record; and
(2) litigants are not prohibited from taking contrary positions in the same
proceeding. And most importantly, VW America’s participation in and
knowledge of the scheme, if any, does not negate the substantial evidence that
the German manufacturers controlled the distribution system in the relevant
way. The outcome of the State’s motion for partial summary judgment on its
claims against VW America remains to be seen, but we fail to see how the
allegations recounted by the dissent have any bearing on Texas courts’ specific
jurisdiction over the German manufacturers.
127See TV Azteca v. Ruiz, 490 S.W.3d 29, 36 n.4 (Tex. 2016) (explaining
that once sufficient jurisdictional facts have been pleaded, the burden shifts to
the defendant to negate all pleaded bases for jurisdiction and observing that
any conflicts in the evidence must be resolved in favor of the trial court’s
special-appearance ruling).
49
recall and service campaigns, including by requiring VW America and
its dealerships to perform all “warranty repairs and/or services and
repair[s]” and “all maintenance work and/or repairs” “in accordance with
[the German manufacturers’] instructions, guidelines[,] and/or
procedures.” Not only is there evidence that VW America and the
dealers were not looped in to the manufacturers’ scheme, but the
Importer Agreements’ express terms left them no choice about whether
and how to perform the post-sale tampering campaigns.128 The dissent’s
contention otherwise misstates the record.
General language in the Importer Agreements purporting to
disclaim an agency relationship between the German manufacturers
and VW America does not overcome the Agreements’ specific language
requiring all the downstream entities to do the German manufacturers’
bidding with respect to recall and service work. An agent may act on
128 With a mere perfunctory citation to the Texas Occupations Code, the
dissent implies that the German manufacturers could not lawfully contract to
retain control over recall and service campaigns for branded vehicles because,
under the Code, (1) “a manufacturer or distributor may not directly or
indirectly: . . . operate or control: . . . a franchised dealer or dealership” and
(2) any franchise term or condition that is “inconsistent with [Chapter 2301] is
unenforceable.” Post at 15 n.7; TEX. OCC. CODE §§ 2301.003(b), .476(c)(2).
Although the German manufacturers have never cited either provision, we will
assume the dissent’s inferred construction of the statute is proper. Even so,
the pertinent inquiry is not whether the German manufacturers lawfully
retained and exercised control over the recall and service campaigns at issue
here but whether they actually retained and exercised control. As we have
explored in some depth, evidence of the latter is more than ample to support
the trial court’s special-appearance ruling.
50
the principal’s behalf for a specific purpose; it need not serve as the
agent for all purposes.129
Finally, the dissent errs in presenting Spir Star and Luciano as
establishing circumstances necessary, as opposed to sufficient, to assert
jurisdiction over a nonresident entity. While the foreign defendants’
forum contacts in those cases differ from the German manufacturers’
contacts in this case, the dissent cannot point to any authority finding
personal jurisdiction lacking when a foreign manufacturer retained
control over a distribution method it subsequently employed to bring a
product to the forum state as part of a plot to deceive consumers and
government regulators. To the contrary, the dissent acknowledges, as
it must, that the stream-of-commerce “‘plus factor’ requirement may be
satisfied by a foreign defendant’s . . . exercise of control over . . . the
distribution system that brought goods into Texas.”130 That is exactly
what happened here.131
129Cf. Jenkins v. Alexander, No. 03-95-00377-CV, 1997 WL 217176, at
*2 (Tex. App.—Austin May 1, 1997, pet. denied) (not designated for
publication) (describing a “special agent” who is “empowered to perform only a
particular task or a particular class of work,” as opposed to a “general agent,”
who is “empowered to transact all the business of his principal of a particular
kind or in a particular place” (quoting First Nat’l Bank v. Kinabrew, 589
S.W.2d 137, 145 (Tex. App.—Tyler 1979, writ ref’d n.r.e.))).
130 Post at 2.
131The dissent also references two federal district court cases involving
claims against foreign automobile manufacturers—one in which the district
court found the manufacturers amenable to the forum’s jurisdiction and one in
which the court found to the contrary. See id. at 26-27 & 29-30 (citing In re
Volkswagen “Clean Diesel” Litigation, No. CL-2016-9917, 2018 WL 4850155,
at *3, *6 (Va. Cir. Ct. Oct. 4, 2018), and discussing Thornton v. Bayerische
Motoren Werke AG, 439 F. Supp. 3d 1303 (N.D. Ala. 2020)). But the dissent’s
51
suggestion that these cases required physical presence in the forum or some
degree of overlapping governance among the manufacturer and distributor is
inaccurate.
The district court in In re Volkswagen noted that language in the
importer agreements “insinuates that [VW America] had no control over the
marketing and advertising materials for the fraudulent vehicles at the heart
of Plaintiffs’ claims,” but the court had no occasion to “rule on the agency
argument alleged by Plaintiffs” in light of the court’s finding “that the German
Defendants already established enough contacts with Virginia alone” through
participation in in-state activities to produce the fraudulent marketing
materials. 2018 WL 4850155, at *3, *6.
Thornton involved complaints about an allegedly defective safety
component that was installed in the manufacturer’s vehicles prior to their
initial sale in the United States; that case did not involve post-sale alteration
of the component or any recall or servicing of the component. 439 F. Supp. 3d
at 1306-08. The district court summarily rejected various bases for personal
jurisdiction, including that the manufacturer had targeted the forum state
(1) based on its targeting of the United States for initial vehicle sales and
(2) based on its “established relationship” with a handful of local dealerships.
Id. at 1311. The court rejected the first argument with a mere citation to the
plurality opinion in Nicastro and the second because the plaintiff failed to
“cite[] any evidence to support it or provide[] any specific facts about the nature
and extent of the alleged relationship.” Id. We need not opine on the
persuasiveness of the court’s analysis, but we note that (1) the instant case
concerns contacts related to post-sale recall and service tampering, not initial
sales of the Affected Vehicles, and (2) here, the State has produced evidence of
the German manufacturers’ control over the distributor and local dealerships
with respect to the specific actions giving rise to the underlying lawsuit.
The dissent also parenthetically cites Rickman v. BMW of North
America LLC for the proposition that “[the district] court could not assert
personal jurisdiction over [a] company that [had] developed deceptive recall
software in Germany where it had only exhibited ‘general efforts to target [the]
U.S. market,’” post at 27, but the dissent’s citation to this holding is misplaced
because, there, the claims against the defeat-device maker did not involve a
recall, post-sale tampering claims, or any allegation that the foreign defendant
controlled the distribution channel, 538 F. Supp. 3d 429, 434, 439 (D.N.J.
2021). More importantly, unlike this case, the claims in Rickman that the
dissent references were against a foreign component supplier and were based
on the initial sale of vehicles in the U.S., which occurred after the defeat-device
52
Accordingly, we turn now to the second prong of the
specific-jurisdiction inquiry: whether the State’s claims are sufficiently
related to those contacts.132 Because this additional constraint on
specific personal jurisdiction is not genuinely contested here, the dissent
fails to consider it.133 But skipping over this essential component of the
jurisdictional inquiry causes the dissent to gravely overstate the scope
of our holding.134
C. Connection to the State’s Claims
Whether the defendant has contacts with the forum state is the
beginning but not the end of our inquiry because “[s]pecific jurisdiction
exists only if the alleged liability arises out of or is related to the
defendant’s activity within the forum.”135 An “affiliation” must exist
component had been supplied to the foreign manufacturer for installation in
its vehicles. Id. at 431, 434, 439. In concluding that the plaintiffs’ allegations
were inadequate to plead personal jurisdiction against the component supplier,
the court’s analysis demonstrates that the circumstances there are materially
distinguishable from those in this case: “There is nothing in the Amended
Complaint to plausibly allege that [the foreign component developer] worked
directly with [the U.S. distributor, whose principal place of business was in the
forum]. Rather, the Amended Complaint paints a picture of [the component
developer] and [the foreign manufacturer] working to implement the defeat
devices, inferably in Germany.” Id. at 439.
E.g., Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 141 S. Ct. 1017,
132
1025 (2021).
133See post at 6 (“The German manufacturers concede that the
relatedness prong is not in dispute here, leaving only a question of purposeful
availment[.]”).
Id. at 4 (proclaiming that today’s holding subjects any foreign
134
manufacturer directing a nationwide recall to personal jurisdiction in Texas).
135 Moncrief Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142, 156 (Tex.
2013); see Ford Motor Co., 141 S. Ct. at 1025-26.
53
“between the forum and the underlying controversy, principally, [an]
activity or an occurrence that takes place in the forum [s]tate and is
therefore subject to the [s]tate’s regulation.’”136 But specific jurisdiction
does not necessarily require proof of causation—“i.e., proof that the
plaintiff’s claim came about because of the defendant’s in-state
conduct.”137 Relationships may “support jurisdiction without a causal
showing” even when the litigation merely relates to the defendant’s
forum contacts.138 In this case, the State’s civil-enforcement claims
ineluctably arise out of or relate to the German manufacturers’
after-sale tampering conduct.139 The conduct at issue took place in
136 Bristol-Myers Squibb Co. v. Superior Ct. of Cal., S.F. Cnty., 137 S.
Ct. 1773, 1780 (2017) (quoting Goodyear Dunlop Tires Ops., S.A. v. Brown, 564
U.S. 915, 919 (2011)).
137 Ford Motor Co., 141 S. Ct. at 1026 (emphasis added).
138 Id.
139 In Ford Motor Co., the Supreme Court noted that the “first half” of
the “arises out of or relates to” standard—that is, the “arises out of” half—“asks
about causation,” while “the back half, after the ‘or,’ contemplates that some
relationships will support jurisdiction without a causal showing.” Id. Because
the State’s after-sale tampering claims clearly arise out of the recall and
service tampering itself—a direct causal relationship connects the litigation to
the contacts—we “need not determine whether [the] ‘substantial connection’
standard” articulated in our precedent “exceeds the bounds of due process.”
See Luciano v. SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 16 n.5 (Tex.
2021).
54
Texas, is subject to Texas’s regulation under Texas law,140 and will form
the “focus of the trial.”141
The requisite relatedness is illustrated by contrasting the facts
alleged in this case with Moncrief Oil International Inc. v. OAO
Gazprom.142 There, a Texas resident argued that Texas courts could
permissibly exercise jurisdiction over a Russian defendant that
tortiously interfered with the resident’s business relationships.143 But
we held that even though the defendant was amenable to specific
jurisdiction on a different claim, Texas courts could not exercise
personal jurisdiction with respect to the tortious-interference claim
because the alleged interference arose out of a meeting that took place
140 See TEX. HEALTH & SAFETY CODE § 382.085(b); TEX. WATER CODE
§§ 7.101–.102; 30 TEX. ADMIN. CODE § 114.20(b), (e); see Bristol-Myers Squibb,
137 S. Ct. at 1780 (“In other words, there must be . . . an activity or an
occurrence that takes place in the forum State and is therefore subject to the
State’s regulation.” (internal quotation marks and alteration omitted)).
141See Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 585 (Tex.
2007) (explaining that the defendant’s Texas contacts and the litigation’s
operative facts were not sufficiently related when the “focus of the trial” would
be on events that took place outside of Texas, which would “consume most if
not all of the litigation’s attention” and toward which “the overwhelming
majority of the evidence [would] be directed”); see also Moncrief Oil Int’l Inc. v.
OAO Gazprom, 414 S.W.3d 142, 156-57 (Tex. 2013) (looking to the events
principally involved in the merits claims to determine whether the defendant’s
Texas contacts and the operative facts of the litigation were sufficiently related
to support specific jurisdiction).
142 414 S.W.3d 142 (Tex. 2013).
143 Id. at 156.
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exclusively in California.144 We explained that “a nonresident directing
a tort at Texas from afar is insufficient to confer specific jurisdiction.”145
This case presents the opposite scenario and, predictably,
produces the opposite result. Unlike Moncrief, which involved an
alleged tort committed elsewhere that merely produced effects in
Texas,146 the after-sale tampering took place in Texas; the State’s claims
arise directly out of that conduct; and the substantiality of the
connection is “enhanced” by Texas’s strong interest in protecting its
regulatory scheme,147 which includes ensuring faithful observance by
nonresidents and vindicating violations of its own laws in its own courts.
Because the State’s after-sale tampering claims clearly arise out
of or relate to the German manufacturers’ contacts with Texas, the
German manufacturers have established contacts that are sufficiently
connected to Texas to satisfy due-process guarantees.148
144 Id. at 157. The plaintiff also alleged that the nonresident defendant’s
establishment of a Texas subsidiary to compete with the plaintiff subjected the
defendant to Texas’s jurisdiction. Id. We disagreed because the parent did not
sufficiently control the subsidiary such that the subsidiary’s Texas contacts
could be imputed to the nonresident parent. Id. As explained above, there is
no need to impute VW America’s contacts to the German manufacturers given
their control over the software-update distribution stream.
145Id. (citing Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d
777, 790-92 (Tex. 2005)).
146See id.; see also, e.g., Walden v. Fiore, 571 U.S. 277, 290 (2014) (“The
proper question is not where the plaintiff experienced a meaningful injury or
effect but whether the defendant’s conduct connects him to the forum in a
meaningful way.”).
147 See Moncrief Oil, 414 S.W.3d at 152.
148 See, e.g., Walden, 571 U.S. at 283.
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D. Fair Play and Substantial Justice
“Once minimum contacts have been established, we must still
consider whether, for other reasons, exercising jurisdiction over the
nonresident defendant would nevertheless run afoul of ‘traditional
notions of fair play and substantial justice.’”149 While this catchphrase
is “well known to appellate courts,” it is nonetheless “imprecise.”150
When a nonresident defendant has minimum contacts with the forum,
“rarely will the exercise of jurisdiction over the nonresident not comport
with traditional notions of fair play and substantial justice.”151 To avoid
jurisdiction, the defendant would have to present “a compelling case that
the presence of some consideration would render jurisdiction
unreasonable.”152
At oral argument, the German manufacturers forthrightly
conceded that if the standard for specific jurisdiction were satisfied,
traditional notions of fair play and substantial justice would not
preclude Texas courts from exercising personal jurisdiction, and we
agree. Accordingly, the trial court did not err in exercising specific
personal jurisdiction over the German manufacturers.
149 Luciano v. SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 18 (Tex.
2021) (quoting Int’l Shoe Co. v. State of Wash., Off. of Unemployment Comp. &
Placement, 326 U.S. 310, 316 (1945)).
150 Spir Star AG v. Kimich, 310 S.W.3d 868, 872 (Tex. 2010).
151 Moncrief Oil, 414 S.W.3d at 154-55.
152 Guardian Royal Exch. Assurance, Ltd. v. Eng. China Clays, P.L.C.,
815 S.W.2d 223, 231 (Tex. 1991) (quoting Burger King Corp. v. Rudzewicz, 471
U.S. 462, 477 (1985)).
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III. Conclusion
Unlike many personal-jurisdiction disputes in which a
nonresident manufacturer has merely placed a product in a stream of
commerce that fortuitously carried the product to the forum state, the
German manufacturers effectively—and knowingly—dropped the
tampering software down a chute that guaranteed it would land in
Texas. The manufacturers developed the product, controlled the
distribution stream that brought the product to Texas, and called all the
shots. Because the trial court properly denied the special appearances,
we reverse the court of appeals’ judgment and remand to the trial court.
John P. Devine
Justice
OPINION DELIVERED: May 5, 2023
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