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Texas Supreme Court Limits Personal Jurisdiction Over Non-Texas Companies
In a notable decision impacting businesses operating across state lines, the Texas Supreme Court has reinforced the principle that non-Texas companies must purposefully direct their activities toward Texas to be subject to the jurisdiction of Texas courts. The rulings came in two separate cases, *BRP-Rotax GmbH & Co. KG v. Shaik*, No. 23-0756 and *Hyundam Indus. Co. v. Swacina*, No. 24-0207, both decided on June 20, 2025.
Key Takeaways from the Court’s decisions
The court’s opinions clarify the “stream-of-commerce-plus” test,emphasizing that it is indeed not sufficient for a company to merely foresee that its products might end up in Texas. According to Justice Young, writing for the Court in *BRP-Rotax GmbH & Co. KG v. Shaik*, “the stream-of-commerce-plus test requires a defendant to specifically target Texas.”
Did You Know? The Texas Supreme Court’s decisions align with a broader trend of limiting the reach of state courts over out-of-state defendants, reflecting ongoing debates about fairness and jurisdictional boundaries in the U.S. legal system.
Background of the Cases
The cases involved plaintiffs who were injured in Texas by allegedly defective products manufactured by foreign companies. These companies designed and manufactured their products abroad, selling them to foreign distributors without direct sales, presence, or marketing efforts in Texas. The plaintiffs argued that indirect sales, knowledge that the products might reach Texas, English-language websites, and general regional targeting were enough to establish personal jurisdiction.
Both the trial court and the court of appeals initially sided with the plaintiffs, asserting jurisdiction based on the actions of the companies’ foreign distributors and the targeting of broader regions that include Texas.
The Court’s Holding on Personal Jurisdiction
the Texas Supreme Court reversed these decisions, holding that Texas courts cannot assert specific personal jurisdiction over a non-Texas company that does not directly target Texas for business. The court emphasized that merely foreseeing that a product might end up in Texas is insufficient. Personal jurisdiction requires a deliberate effort to serve the Texas market.
Pro Tip: Companies should carefully review their distribution agreements and marketing strategies to ensure they are not inadvertently creating contacts that could subject them to jurisdiction in Texas.
Implications for Businesses
The court’s decisions have several important implications for businesses operating outside of Texas:
- The “stream-of-commerce-plus” test requires a defendant to “specifically target Texas.” Merely placing a product into the stream of commerce is not enough unless there is “additional conduct” evincing an intent to serve the Texas market.
- The court emphasized that only the defendant’s own conduct matters, not the conduct of independent foreign distributors or other third parties. However, the court cautioned that a foreign company cannot avoid jurisdiction in Texas by using “formalistic structuring” or “deploying others” to target the Texas market on its behalf.
- The court clarified that its recent decision in *State v. Volkswagen Aktiengesellschaft*, 669 S.W.3d 399 (Tex. 2023), did not subject a defendant to personal jurisdiction merely because the defendant targeted a broad region that included Texas. 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.
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