For the second time, the Texas Supreme Court heard oral arguments Tuesday in a case that asks it to decide whether Texas courts have personal jurisdiction over German auto manufacturers Audi and Volkswagen, which would allow the state’s environmental lawsuit against them to proceed.
Chief Justice Bonnie Sudderth of the Second Court of Appeals in Fort Worth and Justice Jaime E. Tijerina of the Thirteenth Court of Appeals in Corpus Christi were appointed by the governor to hear the case — over the German companies’ objections — after Justice Jimmy Blacklock and Justice Evan Young recused themselves. Both Sudderth and Tijerina are Republicans who were initially appointed to the bench by the governor and have since won reelection.
Texas is trying to haul the German car manufacturers into state court to face state law environmental claims stemming from the emissions-cheating software scandal perpetrated by the companies.
The solicitor general of Texas, Judd E. Stone II, told the justices Tuesday that the court’s case law is clear: When a defendant engages in additional conduct such as advertising, beyond simply introducing a harmful product to the state, that is enough to establish personal jurisdiction.
In this case, the German manufacturers directed intermediaries to advertise in Texas, brought illegal software to Texas, installed that software on products belonging to Texas residents and profited from that conduct, Stone said.
Justice Tijerina asked Stone to respond to the argument from VW Germany and Audi Germany that it targeted the United States — not Texas specifically — by sending the vehicles to its American counterpart, VW America.
Stone said that’s a disputed fact that the court must construe in favor of the state at this point in the litigation. Justice Jane Bland followed up, asking Stone whether he agreed with the evidence in the record that it was VW American that took delivery of the vehicles in Virginia and “assumed responsibility for warranting their fitness and compliance with state law.”
Stone said he agreed.
“But this claim arises from tampering software,” he said. “This is not a circumstance where the German respondents sold vehicles only for use in federal enclaves or to the federal government … they instead engaged in conduct putatively in all 50 states.”
“This court has already said … the existence of personal jurisdictional contacts elsewhere don’t lessen the propriety of exercising personal jurisdiction in Texas.”
The tort that was committed in this case, Stone said, “was against the environment of Texas itself — the literal air, water and ground that comprises Texas as an entity.”
Jeffrey B. Wall of Sullivan & Cromwell, arguing on behalf of the automakers, warned the justices that if the state of Texas’ theory of what establishes personal jurisdiction is correct, it could turn Texas into “one of the most plaintiff-friendly courts” in the country and would subject even small business owners in the state to personal jurisdiction in all 50 states.
Justice Sudderth asked Wall to respond to the argument that the environmental tort alleged in this case was committed against the state of Texas and what that means for the jurisdictional issue.
Wall said the environmental tort alleged here “occurred throughout the United States” and noted that the federal government already has punished the German companies for the conduct to the tune of $1.3 billion — $209 million of which was sent to Texas for environmental mediation and other things.
Wall urged the court to “focus on purposeful availment” and whether the German companies specifically targeted Texas, which he argues they did not do.
After oral arguments were first heard by the court, in February 2022, without either party requesting the move the Texas Supreme Court abated the case June 24 and removed it from its active docket. For the past several years the court has decided every case it accepts by the end of the term, making this case an outlier.
Chief Justice Nathan Hecht sent a letter to the governor that same day informing him that two justices — Blacklock and Young — recused themselves from the case after argument and asked that he appoint two new justices in their place to “participate in the deliberation and determination of these cases.”
Volkswagen and Audi objected to that request, arguing in a June 29 letter that allowing the governor to appoint two hand-picked justices would be tantamount to allowing the state “to be the judge of its own cause.” They said the appointments would raise due process and ethical issues.
“We assume the reason for that rare request is that five of the remaining seven members of this court are unable to concur on a decision, as Article 5, Section 2 of the Texas Constitution requires,” the manufacturers wrote. “We appreciate the potential need for a path forward. With all respect, however, there is perhaps no axiom more fundamental to the law than that no one may be the judge in his or her own cause.”
Volkswagen and Audi suggested that the court, if unable to obtain a five-justice majority, should instead “dismiss these petitions as improvidently granted under Texas Rule of Appellate Procedure 56.1(d) and to decide the jurisdictional question here in a future case.”
In August, the governor appointed Sudderth and Tijerina to hear the case.
The Texas Supreme Court rejected the arguments from Volkswagen and Audi against the appointments, saying they had misunderstood “the nature and structure of Texas’ government.”
Audi and Volkswagen are represented by Jeffrey B. Wall, Arnaud Camu, Nicholas Menillo, Jason Barnes and William B. Monahan of Sullivan & Cromwell; Robert L. Sayles, Samuel T. Acker, William Snyder, David C. Miller, Madeleine Bourdon and Richard Sayles of Bradley; and Jeffrey S. Levinger.
Texas is represented by its own Judd E. Stone II, Rance Craft, Lisa Bennett, Nanette Dinunzio and Patrick K. Sweeten.
The case numbers are 21-0130 and 21-0133.