Posted by Rich Phillips, Emily Fitzgerald, Connor Bourland,and Brandon King
This week, the Texas Supreme Court will hear argument in eight cases over three days. You can watch arguments live (or watch the recordings, which are usually posted by the day after argument) here.
Tuesday, October 8
No. 17-0862, Energy Transfer Partners, LP v. Enterprise Products Partners, LP — The principal issue in this appeal is whether ETP and Enterprise formed a general partnership under the Texas Business Organizations Code. The jury found that ETP and Enterprise were in a general partnership, and Enterprise breached its duty of loyalty as a partner. The Dallas Court of Appeals reversed in part, holding that ETP and Enterprise did not form a general partnership as a matter of law because the parties’ written agreements contained unperformed conditions precedent that precluded the formation of a partnership unless ETP obtained a jury finding that the parties waived those conditions precedent, which ETP failed to do. ETP argues that the Court of Appeals improperly rewrote the TBOC’s “totality-of-the-circumstances test” by holding that “the law of conditions precedent” trumped the other evidence establishing a partnership. Enterprise argues that the TBOC is not the sole source of rules for determining partnership formation, thus common-law principles of conditions precedent and waiver supplement the TBOC’s partnership-formation provisions.
No. 18-0044, Copano Energy LLC v. Stanley D. Bujnoch, Life Estate — This case addresses whether a series of emails is sufficient to satisfy the statute of frauds. The trial court granted summary judgment for Copano, but the court of appeals reversed, finding that fact issues precluded summary judgment In the Supreme Court, Copano argues that even taken together, the series of emails does not comply with the statute of frauds because the emails do not sufficiently identify the parties or the property at issue and because they contain language indicating that an agreement would be executed in the future.
No. 19-0452, Janvey v. GMAG, LLC — This certified question from the Fifth Circuit arises from the Stanford ponzi-scheme litigation. The receiver filed a fraudulent-transfer suit against an investor who obtained about $88 million from Stanford before the SEC sued Stanford. Over the receiver's objection, the jury in federal district court was asked whether an investigation in Stanford would have been futile. The jury found that the transferee was on inquiry notice of the fraud and did not conduct an inquiry, but that an inquiry would have been futile. The Fifth Circuit has asked the Texas Supreme Court whether a transferee can invoke the good-faith defense by showing that, even if it was on inquiry notice, any further inquiry would have been futile.
Wednesday, October 9
Wednesday's arguments all have a theme: the Texas franchise tax and the cost-of-goods-sold deduction.
No. 17-0444, Sunstate Equipment Co. v. Hegar — This case involves the ability of a heavy-equipment-rental-company to deduct the costs of delivering and picking up the equipment as a cost of goods sold. The trial court granted summary judgment for Sunstate; the Third Court of Appeals reversed and rendered. At issue in this case is (1) whether costs incurred in delivering and picking up the equipment qualifies for the costs of good sold deduction under Texas Tax Code § 171.1012 and (2) whether delivering and picking up equipment constitutes “furnishing labor … to a project for the construction … of real property,” which would also allow Sunstate to deduct these costs under section 171.1012.
No. 17-0464, Hegar v. American Multi-Cinema Inc. — In this case, the Court will consider whether the cost of showing movies at a movie theater qualifies as a cost of good sold for purposes of a franchise-tax deduction.The trial court found that the costs are deductible and the court of appeals affirmed. The issue is whether showing a movie constitutes the sale of tangible personal property (in which case the cost of doing so would be deductible) or the sale of a service (in which case it would not be deductible).
No. 17-0894, Hegar v. Gulf Copper & Manufacturing Corp. — In this third and final franchise tax case, the Court will consider several issues related to the cost-of-goods-sold deduction and the subcontractor flow-through revenue exclusion provisions of the Texas Tax Code. The trial court awarded final judgment to Gulf Copper, granting a refund on the franchise tax paid and affirming Gulf Copper’s calculation of its deductions. The court of appeals affirmed the judgment as to the revenue exclusion, but reversed and remanded as to the cost-of-good-sold deduction. Both parties petitioned for review. The numerous in this case include (1) whether Gulf Copper was entitled to subtract costs under the COGS deduction for costs associated with furnishing labor and materials for the development of offshore oil and gas reserves; (2) whether Gulf Copper was entitled to use the “federal piggybacking” method of calculating its COGS or if, as the State argues, it was required to use a “cost-by-cost” calculation; (3) whether Gulf Copper was additionally entitled to revenue exclusion for hourly payments made to subcontractors through the “subcontractor flow-through” provision, section 171.1011 of the Texas Tax Code; and (4) assuming Gulf Copper put forth no evidence of allowable deductions under COGS and no evidence disputing the Comptroller’s calculation of the allowable deductions, whether the court of appeals improperly remanded for a new trial on Gulf Copper’s COGS deduction claim.
Thursday, October 10
No. 18-0426, Brewer v. Lennox Hearth Products, LLC. – This case involves a sanction against William Brewer arising from his use of a pretrial phone survey. Six weeks before the trial in a products liability/wrongful death case, Brewer's law firm drafted a survey concerning the alleged defective product and hired a third party to conduct telephone interviews in the local community. The plaintiffs moved for sanctions against the law firm, arguing the survey was an improper attempt to influence the jury pool. The trial court denied the defendant’s motion to continue and, after a hearing, sanctioned Brewer. The court of appeals affirmed. The primary issues on appeal are whether: (1) the court of appeals erred in affirming the sanctions award; (2) evidence supported the trial court’s finding of intentional, bad-faith conduct; (3) the survey significantly interfered with a core judicial function; and (4) the trial court’s denial of the motion to continue deprived Brewer of an opportunity to present a full and fair defense.
No. 18-0737, In re Murrin Brothers 1885 Ltd. – This original proceeding arises from a dispute between a company’s majority and minority shareholders. The Company Agreement required unanimity for major decisions, such as authorizing the representation of counsel. After a dispute arose among the shareholders, the majority faction engaged counsel regarding litigation against the minority faction; and the minority faction alleged this act was ultra vires absent a unanimous vote. The majority faction, however, contended the company’s Certificate of Formation authorizes a majority to hire counsel. The trial court denied the minority’s rule 12 motion to show authority, as well as its motion to disqualify the majority’s counsel. The court of appeals denied mandamus relief. The primary issues on appeal are: (1) whether, under the governing documents at issue, the majority faction was authorized to engage counsel in this litigation; and (2) whether the trial court and court of appeals erred in refusing to disqualify the majority faction’s law firm.
Posted by Melissa Davis, Stephanie Dooley Nelson, and Connor Bourland
This week, the Supreme Court of Texas will hear arguments on Tuesday and Thursday. You can watch arguments live (or watch the recordings, which are usually posted by the day after argument) here.
Tuesday, September 24
No. 17-0557, Pike, et al. v. Texas EMC Management LLC, et al. — This appeal presents several issues stemming from the breakup of a limited partnership, including whether one of the plaintiffs had standing to pursue its claims; whether the damage awards violate the one-satisfaction rule; whether sufficient evidence supports the damage awards; and whether the court of appeals erred in remanding the case to the trial court for entry of a permanent injunction prohibiting defendants from using the plaintiffs’ trade secrets. (Note: Thompson & Knight LLP represents the Respondents in this case.)
No. 19-0970, Office of the Attorney General v. Rodriguez — In this whistleblower case, the court of appeals found legally sufficient evidence of causation based on a retaliatory motive attributed to an intermediate supervisor, whose approval was necessary but not sufficient to result in termination. In its petition, the Attorney General’s Office argued the intermediate supervisor could not be a final decision maker, there was no evidence he acted with retaliatory motive, and that it was entitled to an offset of the front-pay award for years during which Rodriguez failed to look for work. After denial of the original petition, the Attorney’s General’s Office moved for rehearing, focusing on conflicts between the court of appeals’ causation analysis and the Texas Supreme Court’s subsequent opinion in Alamo Heights Independent School District v. Clark, 554 S.W.3d 755 (Tex. 2018), a Texas Commission on Human Rights Act case that analyzed but-for causation. The motion for rehearing also argued that courts of appeals lack guidance on who is the final decision-maker who can create liability for an employer and what an employer must show to demonstrate a failure to mitigate damages when a plaintiff stops seeking other employment.
No. 18-0413, Town of Shady Shores v. Swanson — The principal issue in this appeal is whether governmental entities may use no-evidence summary-judgment motions as a vehicle for challenging jurisdiction on governmental-immunity grounds. The Fort Worth Court of Appeals held that a governmental entity could not use a no-evidence summary-judgment motion to defeat jurisdiction because the governmental entity has the initial burden to negate the existence of jurisdictional facts before the plaintiff has a burden to produce evidence raising a fact question on jurisdiction. The second issue in this appeal is whether the court of appeals erred in holding that the Texas Open Meetings Act waived immunity for certain of Swanson’s claims brought under the Uniform Declaratory Judgments Act. Both the State of Texas and a group of associations of various governmental entities filed amicus briefs.
Thursday, September 26
No. 17-0736, Teal Trading & Development LP v. Champee Springs Ranches Property Owners Ass’n — The Court will consider the validity of a non-access easement (a “spite strip”) that separates two contiguous tracts of property owned by the Petitioner in Kerr County. At issue is whether the Respondent property-owners’ association has standing to enforce the easement when the current and former property owners of the association waived the non-access easement; whether the home-owners’ association should be estopped from enforcing the easement; and whether the easement should be declared void on public policy grounds.
No. 18-0386,Gray v. Skelton — The Court will consider whether the Fourth Court of Appeals properly reversed an order dismissing a legal-malpractice claim under Rule 91a. The case concerns an attorney who, after her conviction of forgery was vacated when the will she allegedly forged was admitted to probate, sued her criminal defense attorney for malpractice. The attorney was never exonerated and filed suit in 2016, one year after her conviction was vacated, but nine years after the alleged malpractice. The trial court dismissed the claim under Rule 91a. The Court of Appeals reversed. At issue in this case is (1) whether the Hughes v. Mahaney & Higgins rule (which tolls the limitations period on legal malpractice arising out of litigation until all appeals have run) applies with equal force to post-conviction proceedings in the criminal context; and (2) whether the Peeler doctrine (which prohibits legal malpractice claims by convicted criminal defendants until after the defendant has been exonerated) extends “exoneration” to vacated convictions.
No. 18-0486, Erkison v. Renda — The Court will consider whether the Hughes rule extends to legal-malpractice claims that occurred in connection with the prosecution of a claim or defense. On the alleged advice of counsel, a business owner transferred various assets to the business’s creditors when the business owed a $12 million debt to the U.S. Government, which led the Government to file a priority suit against the business owner. Eleven years after the alleged advice (six years after the business owner discovered his injury and one year after the final resolution of the Government’s priority suit), the business owner filed a malpractice claim against the attorney who advised him. The trial court granted summary judgment and the Seventh Court of Appeals reversed. At issue in this case is (1) whether the Hughes rules extends to claims of malpractice in connection with, but not actually arising out of, the prosecution or defense of a claim on behalf of the client; (2) whether there exists a “transactional malpractice” exclusion to the Hughes rule under Texas law (and, if it exists, whether it applies); and (3) whether the discovery rule barred the business owner’s claims because he discovered his injury more than two years prior to bringing suit.
Posted by Rich Phillips, Stephanie Dooley Nelson, Dina McKenney, and Connor Bourland
The Texas Supreme Court will hear the first arguments of the term this week, starting on Tuesday. The Court will hear argument in a total of nine cases this week. Last week, Justice Jeff Brown formally resigned to become a United States District Judge in Galveston, and Justice Jane Bland was sworn in. So Justice Bland will be on the bench for arguments this week.
You can watch arguments live (or watch the recordings, which are usually posted by the day after argument) here.
The Court will hear argument in the following cases:
Tuesday (September 17)
No. 17-0822, ConocoPhillips Company v. Ramirez — In this case, the Court will consider several issues related to a trespass to try title action filed by the purported remaindermen of a life estate in minerals subject to an oil and gas lease, including (1) the interpretation of a will to determine whether the decedent granted a life estate in certain minerals in addition to a life estate in the surface interest, (2) the interpretation of Texas Natural Resources Code Chapter 91 regarding pre-judgment interest and attorneys’ fees, (3) the extent to which the purported remaindermen are entitled to a cotenancy accounting from the lessee, and (4) the deductions the lessee was allowed to make from the accounting. After allegedly succeeding to the remainder of their father’s 1/4 mineral interest, the Ramirezes filed suit against ConocoPhillips, alleging that their father’s oil and gas lease did not apply to their interest and that they were owed a cotenancy accounting for 1/4 of the net profits from production from the minerals from the date of first production as well as prejudgment interest and attorneys’ fees.
No. 18-0264, George P. Bush, as the Land Commissioner of the Texas General Land Office v. Lone Oak Club, LLC — In this case, the Court will consider whether the 1929 “Small Bill” applies to land submerged by tidally influenced water. This case concerns the ownership of land submerged by tidal waters in Lone Oak Bayou. The Lone Oak Club succeeded to title to the Barrow Survey, a portion of which extends into the Lone Oak Bayou. While The Club acknowledged that the waters themselves are public waterways, the Club asserted private ownership of the submerged beds. The General Land Office determined, however, that the Bayou, any lakes connected to the Bayou, and submerged lands were state-owned because the waters are tidally influenced and are, therefore, public waterways. The Club filed a trespass to try title action against the GLO and Commissioner Bush. The primary issue in this case is whether the Small Bill, a 1929 act granting title to the holders of land patents lying across, or partly across, waterways and navigable streams similarly granted title to the submerged land under tidally influenced water in favor of the patent holder.
No. 19-0234, Degan v. The Board of Trustees of the Dallas Police & Fire Pension System — This certified appeal from the Fifth Circuit involves beneficiaries of the City of Dallas pension fund for police and firefighters who challenged the constitutionality of a newly enacted statute that affects the withdrawal method from the pension system’s deferred retirement-option plan. The prior statute had allowed retirees to elect among three withdrawal methods: lump-sum, adjusted monthly payments, or as an annuity to be paid in equal monthly payments for the life of the member. The new statute, enacted in 2017 in response to the financial problems afflicting the pension fund, permits only an annuitized option. The Fifth Circuit’s certified questions ask: (1) whether the method of withdrawal of funds from the deferred retirement-option plan is a service retirement benefit protected under the Texas Constitution and, if so, (2) whether the pension board’s decision, pursuant to the statute, to alter previous withdrawal elections and to annuitize the deferred-option money over the plaintiffs’ respective life expectancies, violates the state constitution.
Wednesday (September 18)
No. 17-0905, San Antonio River Auth. v. Austin Bridge & Road L.P. — Austin Bridge and Road L.P. brought claims in arbitration against the San Antonio River Authority (“SARA”)—a governmental agency—relating to a construction project. In the trial court, SARA sought declaratory relief relating to the arbitration claims and moved to stay the arbitration on the grounds that (1) SARA was not authorized to agree to binding arbitration and (2) the arbitration claims were barred by governmental immunity. Under the Governmental Dispute Resolution Act, governmental agencies may develop and use alternative dispute resolution procedures. Texas Government Code section 2009.005 further provides that “[n]othing in this chapter authorizes binding arbitration as a method of alternative dispute resolution.” The issues before the Court include whether Texas Government Code section 2009.005 prohibits a government agency from agreeing to binding arbitration and whether SARA waived its immunity for the arbitration claims.
No. 18-0102, In re Turner — The Court will consider whether Chapter 74’s expert-report requirement applies to a treating physician’s deposition when the physician is a non-party but may become a defendant. In this medical-malpractice case, the plaintiff did not sue her treating physician, and her Chapter 74 expert report did not inculpate the physician. When the plaintiff subsequently sought to depose the treating physician (before the deadline for joining new parties), the physician moved to quash the deposition subpoena on the grounds that the plaintiff had not filed a Chapter 74 expert report concerning his conduct. The plaintiff argues that Chapter 74 does not apply because the physician is not a defendant. The Dallas Court of Appeals granted mandamus relief to prevent the deposition from going forward.
No. 18-0504, Robinson v. Home Owners Management Enterprises — In this home warranty dispute, Robinson asserted class claims in arbitration against Home Owners Management Enterprises Inc. (“HOME”). HOME moved in the trial court to preclude the arbitrator from considering the class claims on the grounds that the issue of whether the arbitration agreement included class claims was an issue for the court and not the arbitrator and that class claims were precluded by the arbitration agreement. The issues before the Court include whether the trial court or the arbitrator should decide class arbitration and whether the arbitration clause authorizes class arbitration.
Thursday (September 19)
No. 18-0068, Warner Bros. Home Entertainment, Inc. v. Jones — This defamation case arises from a motion under the Texas Citizens Participation Act (TCPA), but presents issues about a relatively new defamation statute, rather than about the TCPA. The Defamation Mitigation Act was enacted in 2013 and provides that person who claims to have been defamed "may maintain an action for defamation only if" the person has requested a correction, clarification, or retraction from the defendant and the defendant has refused. Tex. Civ. Prac. & Rem. Code § 73.055(a). The issue for the Supreme Court is the effect of failure to request a correction, clarification, or retraction. The court of appeals concluded that failure to do so does not require dismissal of the claim, but only bars recovery of exemplary damages. Respondent also argues that the remedy for failure to seek a correction, clarification, or retraction is abatement, not dismissal. This will the Court's first opportunity to interpret the Defamation Mitigation Act.
No. 18-0273, In re R.R.K. — This child-custody dispute presents issues regarding whether an order by the trial court was a final judgment that triggered the petitioner's deadline to file a notice of appeal. The trial court entered a "Memorandum" order and then issued an "Order in Suit to Modify Parent-Child Relationship" several months later. The court of appeals found that the Petitioner's notice of appeal was untimely because it was not filed within 30 days of the Memorandum order. Petitioner argues that the Memorandum order was not a final judgment because the trial judge did not intend it to be a final order and because it did not contain specific language required by Texas Family Code section 105.006 for judgment in suits affecting the parent-child relationship ("SAPCR"). Respondent argues that the Memorandum order had all the elements required for a final judgment, even if it did not contain the language required by section 105.006. The issue for the Court is essentially whether the requirements of section 105.006 must be met before an order in a SAPCR can be considered "final" purposes of triggering appellate deadlines.
No. 18-0656, Creative Oil & Gas Operating LLC v. Lona Hills Ranch, LLC — The Court will consider whether the Texas Citizens Participation Act ("TCPA") applies to claims related to the validity or termination of an oil and gas lease. The case began as a trespass to try title action by the lessor of an oil and gas lease asserting that the lease had terminated. The operator and lessee asserted counterclaims that the lessor had breached the lease by falsely communicating to oil and gas purchasers that the lease had terminated and by starting litigation asserting that the lease had terminated without complying with notice requirements in the lease. The lessor filed a motion to dismiss the counterclaims under the TCPA. The issues include whether the statements at issue are subject to the TCPA and, if so, whether the counterclaimants carried their burden under the TCPA to establish a prima facie case on each element of their claims by clear and specific evidence.
Posted by Rich Phillips and Connor Bourland
With apologies for the delay, here are the summaries of the Texas Supreme Court opinions issued on June 7, June 14, and June 21, 2019. With these opinions issued, the Court has five cases argued but not decided. If the Court follows its recent practice, those opinions will all be issued on Friday, June 28.
June 7
No. 18-1099, JCB, Inc. d/b/a Conveying & Power Transmission Solutions v. The Horsbugh & Scott Co. — In this case, the Court addressed two questions of Texas law certified by the Fifth Circuit concerning Business and Commerce Code section 54.004, which allows a sales representative to recover treble damages and attorney’s fees when its principal fails to comply with a provision of a contract governed by the Texas Sales Representative Act. JCB, Inc. was a commissioned sales representative for The Horsburgh & Scott Company. Horsburgh failed to pay JCB’s commission and JCB filed suit. While the case was pending, Horsburgh paid the remaining commissions plus interest. Horsburgh then moved for summary judgment, arguing that because section 54.004 applies only to unpaid commissions, its payment of the remaining commissions plus interest eliminated JCB's rights under the section. The district court granted Horsburgh’s motion. The Fifth Circuit certified two questions: (1) “What timing standard should courts use to determine the existence of any ‘unpaid commissions due’ under … § 54.004(1)?” and (2) “May a plaintiff recover reasonable attorney’s fees and costs … if the plaintiff does not receive a treble damages award under … § 54.004(1), and under what conditions?”
In an opinion by Justice Blacklock, the Court noted that the statue itself did not answer the timing question: nothing in the statute directed courts to look at a specific time to determine whether commissions were unpaid. JCB argued that because the commissions were unpaid at the initiation of the suit, Horsburgh should be liable for treble damages. The Court disagreed, turning to the common law principle that damages can be mitigated and should reflect an amount required to compensate the non-breaching party at the time of the verdict or judgment. The Court thus answered the first question by holding that “the time for determining the existence and amount of ‘unpaid commissions due’ … is the time the jury or trial court determines the liability of the defendant.”
On the issue of attorney’s fees, JCB argued that the plain language of section 54.004 allows attorney’s fees where a principal fails to comply with a provision of the contract and does not depend on an award of treble damages. Conversely, Horsburgh argued that, without an award of treble damages, JCB could not be a prevailing party. The Court sided with JCB, reasoning that nothing in the statute ties the payment of attorney’s fees to an award of treble damages. The only limitation on the award of attorney’s fees is that they must be reasonable—an issue for the district court to decide.
June 14
No. 16-0966, LaLonde v. Gosnell — The Court considered whether the defendants waived application of Texas Civil Practice and Remedies Code Chapter 150 by waiting over 1,200 days after the case was filed to seek dismissal based on the plaintiffs' failure to include a certificate of merit with their original petition. In an opinion by Justice Guzman (joined by Justice Green, Justice Lehrmann, Justice Devine, Justice Brown, and Justice Busby), the Court concluded that the defendants' conduct waived the application of Chapter 150. The Court first rejected the defendants' argument about the standard for determining waiver. The defendants argued that it should not be measured by the "totality of the circumstances" but by the "traditional test." The Court rejected the idea that these are two separate tests. Instead, the Court held that "the universal test for implied waiver by litigation conduct is whether the party’s conduct—action or inaction—clearly demonstrates the party’s intent to relinquish, abandon, or waive the right at issue—whether the right originates in a contract, statute, or the constitution." The Court also noted that where the facts are not disputed, the application of waiver is a question of law. Finally, the Court reviewed the defendants' conduct and found that they impliedly waived application of Chapter 150. The Court noted that while all litigation conduct is inconsistent with the right to seek dismissal, not all litigation conduct is sufficiently inconsistent with Chapter 150 to show an intent to waive its application. The Court then examined the defendants' litigation conduct in detail and concluded that it was sufficiently inconsistent with their rights under Chapter 150 to waive those rights.
Justice Boyd filed a dissenting opinion (joined by Chief Justice Hecht and Justice Blacklock). The dissenters frame the right under Chapter 150 not as "early dismissal" but as the right to seek dismissal at any time. In light of this framing, the dissenters would not have found that the defendants' litigation conduct was sufficient to waive the right.
No. 18-0329, Worsdale v. The City of Killeen — In this case, the Court considered whether the Texas Tort Claims Act waived governmental immunity for the City of Killeen when two motorists were killed when their vehicle struck an unbarricaded dirt mound blocking an unlit country road. The decedents’ survivors sued the City under the Tort Claims Act. As a jurisdictional prerequisite to suit, section 101.101 of the Act requires plaintiffs to give a prompt and formal notice of a claim against the governmental entity unless the entity has “actual notice that death has occurred, that the claimant has received some injury, or that the claimant’s property has been damaged.” Because the survivors did not file a prompt notice of their claim, the City filed a plea to the jurisdiction, which the trial court denied. The court of appeals reversed, finding that the post-accident report as a routine safety investigation was insufficient to provide actual notice to the City to excuse the lack of a prompt notice of claim. The survivors appealed.
In an opinion by Justice Guzman, the Supreme Court reversed and held that the City had actual notice of the claim. Actual notice, the Court noted, requires evidence that establishes the City’s subjective awareness of its responsibility for the accident as ultimately alleged by the survivors. The Court found that the evidence showed that the City was subjectively aware (1) of allegations that the unbarricaded dirt mound and lack of warnings were contributing factors and (2) that the City was responsible for maintaining the road. The eventual investigation into the accident, the Court noted, was not a typical accident investigation; it entailed determining who owned and had responsibility for maintaining the road and led to the City removing the dirt mound after determining that the road was its responsibility. These facts, the Court held, amounted to actual notice of the City’s subjective awareness of its fault as alleged by the survivors. The Court distinguished the facts in the case from the facts in Cathey v. Booth, 900 S.W.2d 339 (Tex. 1995), in which the Court held that mere knowledge of a death through medical records did not amount to actual notice and that knowledge of the death, the governmental unit’s alleged fault, and the identity of the parties involved. The Court also distinguished City of Dallas v. Carbajal, 324 S.W.3d 537 (Tex. 2010) and City of San Antonio v. Tenorio, 543 S.W.3d 772 (Tex. 2018), because the facts in those cases did not show actual subjective awareness that the claimant alleged the city was at fault. The Court emphasized that the awareness at issue is "subjective awareness connecting alleged governmental conduct to causation of an alleged injury to person or property in the manner ultimately asserted." The standard does not require an adjudication of liability or confession of responsibility.
Justice Boyd concurred (joined by Justice Blacklock), but reasoned that the majority, having found that the City had actual notice as required by the statute and Cathey, should have abstained from “unnecessarily and improperly” wading into deciding whether Cathey should have been overruled. The concurrence noted that the Court should wait to decide the fate of Cathey “in a case in which that decision matters” as opposed to a case in which the discussion is “mere dicta.” Having dissented in the Court’s previous case concerning the actual notice exception, City of San Antonio v. Tenorio, Justice Boyd reiterated his reasons for overruling Cathey; namely that Cathey presumed an unexpressed legislative purpose and imposed additional requirements on the statutory waiver of immunity. Nevertheless, Justice Boyd concluded that he, too, would reverse the court of appeals, but “would do so because the evidence establishes that the City had all the actual notice section 101.101(c) actually requires.”
No. 18-0443, In re Geomet Recycling, LLC — This mandamus petition arose from an appeal of the denial of a motion to dismiss under the Texas Citizens Participation Act. Texas Civil Practice and Remedies Code 51.014(b) stays all proceedings in the trial court during an interlocutory appeal from the denial of a TCPA motion. In this case, the court of appeals entered an order lifting the stay to allow the trial court to hold a hearing on the appellees' request for a temporary injunction and motion for sanctions. The appellees were seeking a temporary injunction to prevent use of alleged trade secrets and were seeking sanctions for the appellants' alleged violation of a TRO regarding use of the trade secrets. In an opinion by Justice Blacklock, the Court found that the appellate court did not have the power to lift the statutory stay. The Court noted that nothing in section 51.014(b) grants any court the power to lift the stay imposed by the statute. The Court rejected the appellees' argument that the power to lift the stay could be found in the trial court's inherent constitutional authority. The Court noted that if the appellees did not have any other avenue for relief, the Court would have to address this issue. But the Court found that because 51.014(b) stays only proceedings in the trial court, the appellees could ask the appellate court to grant the relief it wanted to seek from from the trial court. Accordingly, the Court conditionally granted mandamus relief ordering the court of appeals to vacate the order lifting the stay.
June 21
No. 17-0110, Nath v. Texas Children's Hospital — This is the second time this case has been in the Supreme Court. In 2014, the Court affirmed sanctions against Nath for bringing frivolous claims, but remanded the case for the trial court to re-evaluate the award of attorney's fees because the defendants litigated for four years before seeking sanctions. Nath v. Tex. Children's Hosp., 446 S.W.3d 355 (Tex. 2014). (We summarized that opinion here.) On remand, the trial court again awarded the full amount of the defendant's fees. In this second round of appeal, Nath argued that the defendant's fee evidence was insufficient. Relying on a line of cases from some intermediate appellate courts, the defendants argued that because they were seeking fees as sanctions, they did not have to meet the same evidentiary burden as other fee-shifting cases. In a per curiam opinion (Justice Guzman did not participate), the Court first held that even when fees are being awarded as sanctions, the same evidentiary standards apply, rejecting the line of cases that defendants relied on. The Court then reversed the fee award and remanded it for reconsideration in light of the Court's decision in Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 2019 WL 1873428 (Tex. Apr. 26, 2019) (We summarized Rohrmoos here.)
No. 18-0203, Trial v. Dragon — In this real property dispute, the Court considered whether the estoppel by deed doctrine or the Duhig rule barred petitioners from claiming a property interest they inherited from their mother. Leo Trial owned a 1/7 interest in property in Karnes County. He gifted half of his interest to his wife Ruth, giving her a 1/14 interest in the property as her separate property. The deed was recorded shortly after the gift. Several years later, Leo and the other owners of the property (except his wife) signed general warranty deeds conveying the property to the Dragons. A portion of the purchase price was financed. The deeds also contained a 15-year reservation of mineral rights. Nothing in the deeds mentioned Ruth's interest. After Leo died, the Dragons continued making payments, and Ruth accepted them. When the payments were complete, she signed the release of lien as "Leo Trial by Ruth Trial." When Ruth died, her estate passed by intestacy to her two sons. After the mineral reservation expired and the Dragons asked the oil and gas operator for a new division order, the operator discovered Ruth's sons' interests. The Dragons argued that the Duhig rule and estoppel by deed prevented Ruth's sons from claiming any interest in the property.
In an opinion by Justice Green, the Supreme Court disagreed. The Court first reiterated that the Duhig rule is extremely narrow and generally limited to its facts. The court declined to apply it because Leo did not own the interest required to remedy the breach of warranty in the deed. He had already conveyed it to his wife. The Court also rejected the application of estoppel by deed because Ruth's sons were not parties to Leo's deed to the Dragons or his privies. Instead, their claim was based on Ruth's interest, which was her separate property. The Court noted that Leo breached the warranty deed at the time of execution because he could not convey what he purported to convey. And as Leo's heirs, his sons were bound by the warranty deed to defend the Dragons' title (and therefore could be liable for damages for breach of the warranty). But neither the trial court nor the court of appeals considered whether the sons could be liable for damages (as Leo's heirs) for damages caused by their own claims (as Ruth's heirs) to the property. The Court remanded the case for consideration of that issue.
Posted by Rich Phillips, Melissa Davis, Stephanie Dooley Nelson, and Connor Bourland
In the weekly orders on May 24, 2019, the Supreme Court of Texas issued opinions in six argued cases. This leaves the Court with ten cases to be decided before the summer recess.
The cases decided were:
No. 17-0046, Scripps NP Operating, LLC v. Carter – Justice Devine wrote the opinion for the Court in this defamation case applying the “substantial truth” defense in the context of a newspaper’s publication of accusations made by third parties. Several members of the Corpus Christi Chamber of Commerce accused Carter (the Chamber’s President and CEO) of financial and accounting improprieties. Carter sued Scripps after the Corpus Christ Caller-Times (owned by Scripps) published a series of articles about the accusations and surrounding events. The newspaper sought summary judgment, arguing (1) the articles were substantially true because they accurately reported the accusations that were made, regardless of whether the accusations themselves were true and (2) statements in editorials, which tied together previous reporting, were non-actionable opinions. The trial court denied summary judgment on the ground that fact-issues existed, and on interlocutory appeal, the court of appeals and the Texas Supreme Court both affirmed. First, the Supreme Court agreed with Carter that the newspapers’ multiple articles should be considered together to determine whether they were defamatory. Next, the Court rejected the newspaper’s “substantial truth” defense, holding that the articles went beyond merely reporting third-party accusations and instead adopted a “gist” that the accusations were true. And the Court found that a fact issue existed as to the truth of the allegations. Lastly, the Court held that one article published as an editorial made statements that were verifiable as false and thus were not protected opinion.
Of note for appellate practitioners, Carter challenged the Court’s jurisdiction because this interlocutory appeal was from a second summary-judgment motion, filed on remand after a previous interlocutory appeal from a prior summary-judgment motion. Carter argued the newspaper’s second motion was essentially an untimely motion for rehearing that raised issues that were, or could have been, raised in the first motion. The Court disagreed. It applied the analysis from City of Houston v. Jones, where the Court had held that the appellate courts lacked jurisdiction over a second plea to the jurisdiction that raised no new issues and was thus substantively a motion for reconsideration. But the Court held that the newspaper’s second motion here raised new issues and thus was not merely a motion for reconsideration. The Court thus concluded it had jurisdiction and rejected Carter’s invitation to limit parties to one interlocutory appeal under § 51.014(a)(6) per case.
No. 17-0385, Aleman v. Texas Medical Board – This dispute over the power of the Texas Medical Board to discipline a doctor for violating a state law that requires death certificates to be signed electronically generated three separate writings that shed some light on the justices differing approaches to statutory interpretation. State law requires all death certificates to be signed electronically, rather than using pen and paper. To sign electronically, the doctor must register with the system maintained by the state. After one of Dr. Aleman's patients died, the funeral director sent him the death certificate, but because Dr. Aleman had not yet registered with the electronic system, he manually certified the death certificate and sent it to the county registrar. The Texas Medical Board then brought a disciplinary proceeding against Dr. Aleman for violating the statute that requires death certificates to be signed and filed electronically.
The dispute in the Supreme Court centered on whether the Board had statutory authority to sanction Dr. Aleman for failing to sign electronically. The Board has statutory authority to discipline doctors who engage in specified statutorily prohibited practices. One of enumerated practices is found in Texas Occupations Code section 164.052(a)(5): "unprofessional or dishonorable conduct that is likely to deceive or defraud the public, as provided by Section 164.053 [of the Texas Occupations Code], or injure the public." Section 164.053, in turn, lists acts that "for purposes of Section 164.052(a)(5), [constitute] unprofessional or dishonorable conduct likely to deceive or defraud the public." And that list includes "an act that violates any state or federal law if the act is connected with the physician's practice of medicine." The Board contended that (i) failing to sign the death certificate electronically violated a state law and was connected with the practice of medicine (ii) under section 164.053, the failure to sign electronically was "unprofessional or dishonorable conduct likely to deceive or defraud the public" and (iii) the Board therefore had the power to discipline Dr. Aleman. Dr. Aleman argued that his technical violation of the statute requiring an electronic signature could not have deceived or defrauded the public and therefore could not be unprofessional or dishonorable conduct and could not be the basis of a sanction.
In an opinion by Justice Lehrmann (joined by Chief Justice Hecht, Justice Green, Justice Guzman, Justice Devine, and Justice Busby (except as to one footnote)), the Court held that the Board did not have the authority to discipline Dr. Aleman. The majority concluded that an act that violates state or federal law cannot be punished by the Board unless the conduct "is connected with the practice of medicine in a manner that makes it likely to deceive or defraud the public." The majority further concluded that signing the death certificate manually rather than electronically was not likely to deceive or defraud the public and that the violation could therefore not be subject to sanction by the Board. The majority reasoned that "in identifying qualifying behavior, the Legislature did not alter the meaning of the phrase 'unprofessional or dishonorable conduct likely to deceive or defraud the public' to include conduct that is not likely to do either."
Justice Blacklock issued a concurring opinion (joined by Justice Brown), in which he concludes that the Board lacked authority because failing to sign the death certificate electronically was an omission, and the statute is "triggered only when a physician 'commits an act that violates any state or federal law.'"
Justice Boyd filed a dissenting opinion. In his view, the Legislature defined "unprofessional or dishonorable conduct likely to deceive or defraud the public" to include any violation of state or federal law in connection with the practice of medicine. He reasoned that the Court could not second-guess that determination by finding that the failure to sign the death certificate electronically was not likely to deceive or defraud the public.
No. 17-0634, In re Thetford – At issue in this guardianship case is whether an attorney is disqualified from representing one client who is applying to be appointed guardian for one of the lawyer’s former or current clients, without the latter’s consent. In an opinion by Justice Hecht (joined by Justice Green, Justice Guzman, Justice Lehrmann, and Justice Boyd), the Court found that the attorney was not disqualified. Evidencing the fact-specific nature of this inquiry, the Court devoted several pages of its opinion to discussing the facts in great detail. In essence, lawyer Rusty Allen had represented Verna Thetford in connection with her estate planning matters. Later, Allen represented Thetford’s niece in the niece’s application to be appointed Thetford’s guardian. Thetford, who was in her late 80s, vehemently opposed the niece’s guardianship application and contended that the niece had a financial motive for seeking the guardianship.
In the trial court, Thetford’s counsel filed a motion to disqualify Allen from representing the niece based on a conflict of interest. Allen countered that Rule 1.02(g) required him, as Thetford’s lawyer, to institute guardianship proceedings for Thetford by also representing Thetford’s niece in her guardianship application. The trial court denied Thetford’s disqualification motion and appointed the niece her guardian, and the court of appeals denied mandamus relief.
The Texas Supreme Court first analyzed the interplay between the conflict-of-interest rules and Rule 1.02(g). The Court observed that Rule 1.02(g) requires an attorney to take “reasonable action” to protect a client and allows, but does not require, the attorney to institute a guardianship proceeding. Accordingly, the Court declined to consider whether Rule 1.02(g) applied because even if it did apply, it did not require Allen to initiate the guardianship proceeding. The Court reasoned that Rule 1.02 had to be read together with the conflict-of-interest rules to determine whether filing the guardianship application for the niece was “reasonable action,” because Rule 1.02 does “not trump the conflict-of-interest rules.”
The Court next considered whether the trial court abused its discretion in denying Thetford’s motion to disqualify Allen. The Court noted that, under rules 1.06(b) and 1.09(a)(3), Thetford was required to show that Allen’s representations of her were (1) substantially related to the matters in the guardianship proceeding; and (2) the guardianship proceeding was adverse to her. The Court concluded that Thetford failed to demonstrate the substantially-related requirement, largely because the confidences she shared with Allen in drafting her estate-planning document were reflected in the estate instruments he prepared and were “open knowledge.” In addition, even if there were other confidences that were not reflected in those instruments, Thetford had not shown how they were substantially related to the guardianship proceeding. The Court therefore held that the trial court did not abuse its discretion in denying the motion to disqualify Allen. In a portion of the opinion joined only by Justice Green and Justice Guzman, Chief Justice Hecht also concluded that Thetford had not shown that the guardianship proceeding was adverse to her. The three justices concluded that the mere fact that she opposed the guardianship did not mean that it was not in her best interest. Justice Brown (joined by Justice Devine, Justice Blacklock and Justice Busby) dissented. The dissenters would have adopted the guidance from the ABA Model Rules, which prohibit a lawyer from representing a third-party seeking to impose a guardianship on the lawyer's client.
No. 17-0724, Garza v. Harrison – In this case, the Court considered the scope of the election-of-remedies provision in section 101.106(f) of the Texas Tort Claims Act. That provision requires courts to grant a motion to dismiss a lawsuit against a governmental employee sued in an “official capacity” but allows the governmental unit to be substituted for the employee. Here, an off-duty City of Navasota police officer was working as a security guard at his apartment complex in Harris County (but outside the City of Navasota). The officer fatally shot a suspect while attempting to make an arrest at the complex.
The suspect’s parents sued Garza in his individual capacity for wrongful death, but the officer asserted the action was actually an official-capacity suit that must be dismissed under the Tort Claims Act. Under the Act, a governmental employee is sued in an official capacity when the suit (1) is “based on conduct within the general scope of that employee’s employment” and (2) “could have been brought under [the Act] against the governmental unit.” The trial court denied the motion, finding a fact issue as to whether the officer was acting as a peace officer or as a security guard for his landlord at the time of the shooting. The court of appeals affirmed.
In an opinion by Justice Guzman, the Supreme Court reversed and rendered judgment dismissing the suit against the officer. The parties did not dispute that Garza was a Navasota Police Department employee and the suit “could have been brought” under the Act against the City of Navasota. Therefore, the sole issue before the Court was whether, within the meaning of section 101.106(f), Garza acted “within the general scope of [his] employment” as a police officer when he attempted to arrest the suspect while Garza was off duty and outside the City’s territorial jurisdiction. The Court determined that “a licensed peace officer employed by a city’s police department and acting under the warrantless-arrest provision in article 14.03(g)(2) of the Code of Criminal Procedure is within the general scope of the officer’s employment for purposes of section 101.106(f) of the Tort Claims Act.” As a result, the Court concluded that Garza was sued in his official capacity and was entitled to be dismissed from the suit. Justice Boyd (joined by Justice Lehrmann) filed a short concurrence to emphasize that the Court did not consider whether the suit could have been brought against the City of Navasota because the plaintiffs did not challenge that requirement of the election-of-remedies provision.
No. 18-0186, Pathfinder Oil & Gas, Inc. v. Great Western Drilling, Ltd. – In this lawsuit, the parties disputed the enforceability of a letter agreement that granted Pathfinder a 25% working interest in certain mineral leases in the Permian Basin. On the eve of trial, the parties stipulated that only certain issues would go to the jury and that favorable jury findings would entitle Pathfinder to specific performance in lieu of monetary damages. At the charge conference, Great Western requested submission of a jury question on whether Pathfinder was ready, willing, and able to perform — an element of specific performance that is a fact question when disputed, but was not one of the issues in the parties' pretrial stipulation. The trial court declined to submit the issue based on the parties’ stipulation. The charge submitted only the issues listed in the parties’ stipulations, the jury returned findings favorable to Pathfinder, and the trial court awarded specific performance. The court of appeals reversed, construing the parties’ pretrial stipulation as entitling Pathfinder to recover specific performance only if it proved the elements of specific performance. In a unanimous opinion by Justice Guzman, the Supreme Court disagreed, holding that Great Western waived the right to insist on any jury findings other than those included in the stipulation. The Court reiterated that stipulations are contracts, to be construed under the rules of contract construction. Based on the plain language of the stipulations, the Court held that the parties agreed to submit “only” the specified issues to the jury and that favorable findings on those issues would “entitle[]” Pathfinder to specific performance. The Court distinguished its holding in Digiuseppe v. Lawler that a contract provision providing that a party could “seek to enforce specific performance of this Contract” did not obviate the party’s obligation to prove the elements of specific performance at trial. In that case, the agreement granted the party only the right to “seek” specific performance, without defining or limiting the proof that would be necessary to prevail.
No. 18-0341, Tarrant County v. Bonner – In this summary-judgment appeal, the Court addressed the liability standard that applies to an inmate's claim for personal injury while incarcerated. Banner, an inmate in the Tarrant County Jail, was injured after he sat in and fell from a broken chair in the prison’s multi-purpose room while receiving diabetes treatment from prison staff. The primary issue was whether the injury was "in connection with inmate activities," which would require Bonner to prove that the county acted with conscious indifference or reckless disregard. In an opinion by Justice Devine, the Supreme Court held that the injuries did occur "in connection with" inmate activities and that the County was entitled to summary judgment. The Court reasoned to be “in connection with” inmate activities, the negligent act or omission need only be “reasonably related to the covered programs or activities, even when the relationship is indirect.” The Court then held that the county’s actions did not rise to the level of conscious indifference or reckless disregard. Conscious indifference, the Court noted, is essentially the same thing as gross negligence and “consists of an act or omission involving an extreme risk to others, an actual awareness of that risk, and knowledge that harm was a highly probable consequence of the act or omission.” The Court also noted that a person cannot be consciously indifferent to a risk that is less than “extreme.” The found that there was evidence of negligence, but no evidence of conscious indifference or reckless disregard.
Justice Boyd concurred in judgment only, and explained in his concurring opinion that he disagreed with the Court’s analysis in two respects. First he disagreed that “conscious indifference is ‘the same as’ gross negligence.” Second, he disagreed that “a person cannot be consciously indifferent to a risk that is less than ‘extreme.’”
Posted by Rich Phillips, Melissa Davis, Stephanie Dooley Nelson, Emily Fitzgerald, and Connor Bourland
On Friday, May 17, 2019, the Supreme Court of Texas issued opinions in four argued cases, including Justice Busby's first signed opinion as a member of the Court. The Court also issued two per curiam opinions. The Court now has 16 argued cases remaining to be decided before the summer recess. Access the complete order list here.
The Court issued the following opinions:
No. 17-0733, McAllen Hospitals, L.P. v. Lopez — In this employment dispute, the Court analyzed whether sufficient evidence supported the jury’s finding that McAllen Hospitals impliedly contracted to pay certain nurse employees an annual salary rather than an hourly wage. The nurses relied on several factors, including their performance reviews, which listed their “Annual Rate” instead of base pay “per hour,” certain payroll forms, provisions in the employee handbook, and policies circulated by the hospital. The jury found for the nurses; the Hospital challenged the legal sufficiency of the evidence to support the finding of an implied contract, but the court of appeals affirmed. In a unanimous opinion authored by Justice Busby, the Court held that there was legally insufficient evidence to find an implied contract for an annual salary. Specifically, the Court determined that the parties’ course of dealing failed to show the Hospital’s intent to pay fixed salaries because the Hospital paid the nurses hourly wages since the nurses first began working at the Hospital (which, for some of the nurses, was a period of over 20 years); the performance reviews were “susceptible to multiple, equally probable inferences, requiring the factfinder to guess in order to reach a conclusion,” which amounts to legally insufficient evidence of the Hospital’s intent to pay the fixed salaries; and the Hospital’s handbook was legally insufficient evidence of the Hospital’s intent because the handbook contained an explicit disclaimer of any contractual intent.
No. 17-0840, Time Warner Cable Texas LLC v. CPS Energy — This appeal from an administrative proceeding in the Public Utilities Commission (PUC) addressed the rates a municipal utility can charge telecommunications providers for attaching their wires or cable to the utility's poles. Section 54.204(b) of the Public Utility Regulatory Act (PURA) prohibits municipalities and municipally owned utilities from discriminating among telecommunications providers with respect to rates charged for utility pole attachments. A municipal utility in San Antonio was billing Time Warner and AT&T the same amount for pole attachments, but AT&T was not paying the full amount billed, and the utility did not take action to collect the outstanding balance. Time Warner complained, and in a final order, the PUC determined that the utility had violated PURA by failing to take “meaningful,” “serious,” and “timely action to ensure that all pole attachers actually paid the uniform rate it invoiced.” The court of appeals reversed the PUC order, reasoning that the statute required the utility to “charge” uniform rates, not to “collect” uniform rates. In a unanimous opinion by Chief Justice Hecht (Justice Busby did not participate), the Supreme Court disagreed, holding that the PUC’s decision was reasonable because the statute prohibited discrimination and the fact that the utility had collected substantially more from Time Warner than AT&T had a discriminatory effect on Time Warner.
No. 17-0850, KMS Retail Rowlett, LP v. City of Rowlett, Texas — In this eminent-domain dispute, the Court considered whether converting a private-road easement to a public road violated the Texas Constitution or Government Code chapter 2206, which prohibits takings for economic-development purposes. The City of Rowlett condemned the private-road easement and additional land to connect the private road to an adjacent tract. The landowner argued that the taking was not for a public use and was solely for economic development because it's purpose was to give more convenient access to the adjacent tract to facilitate construction of a grocery store. The trial court rejected the landowner's arguments and the court of appeals affirmed. In an opinion by Justice Brown (joined by Chief Justice Hecht, Justice Green, Justice Guzman, Justice Devine, and Justice Busby), the Court affirmed. The Court first held that chapter 2206 does not apply because it expressly excludes from its coverage the use of eminent domain for "transportation projects, including, but not limited to railroads, airports, or public roads or highways." The Court rejected the landowner's argument that this exception applies only to "legitimate" road projects. The Court reasoned that if every project has to be scrutinized to determine whether it is a pretext to confer an economic benefit before applying the exception, then the exception would have not real operation. The Court then concluded that the taking was for a constitutional public use. The Court noted that the landowner's argument was essentially that even if the taking might be for a public use under different circumstances, the alleged motive to benefit a private landowner made the taking improper. The Court emphasized that this is not a case in which a taking is "packaged as a public use but actually conferred only a private benefit." In short, a taking does become fraudulent "if the alleged private benefit does not negate the ostensible public use but simply suggests an additional motive behind the taking." In response to the dissent's arguments about the impact of amendments to the constitutional taking provision, the majority notes that the landowner did not ask the Court to consider the effect of the amendments. The majority specifically invites parties to present these issues in future cases: "we would welcome the opportunity [this] position in a future case in which the issue is directly presented."
Justice Blacklock dissented (joined by Justice Lehrmann and Justice Boyd). The dissenters argue that the Court's taking jurisprudence is too deferential to condmenors. In light of amendments to the takings provision of the Texas Constitution, the dissenters conclude that deference to legislative determinations of "public use" should be discontinued and that condemning authorities should be required to prove their compliance with the constitutional provision rather than shifting the burden to negate public use to the landowner. The dissenters would also expand the possible defenses for landowners beyond fraud, bad faith, and arbitrariness.
No. 18-0059, Dallas/Fort Worth Int'l Airport Board v. Vizant Technologies, LLC — In this case, the Court considered whether governmental immunity applies to a suit against the Dallas/Fort Worth International Airport Board alleging breach of contract and whether Local Government Code chapter 271 waives the Board’s immunity from suit. The Board contracted with Vizant to review the airport’s payment-processing costs. The contract provided that Vizant’s fee would be calculated based on the amount of money the airport saved based on Vizant’s recommendations, capped at $50,000. The contract also provided that if Vizant’s fee exceeded $50,000, then the Board would “make a good faith effort to receive board authorization to increase compensation.” Vizant exceeded the $50,000 fee, the Board denied their request for additional compensation, and Vizant sued for breach of contract, fraud, and fraudulent inducement, alleging that no good faith effort was made to increase compensation. The trial court denied the Board's plea to the jurisdiction asserting governmental immunity.The Dallas Court of Appeals reversed as to the fraud claims, but affirmed as to the breach of contract claim, finding that chapter 271 waived the Board’s immunity on the contract claim.
In a unanimous opinion by Justice Boyd, the Supreme Court reversed as to the contract claim and rendered judgment dismissing all claims. The Court noted that the legislature has unambiguously declared that maintaining, operating, and regulating an airport are governmental functions, meaning that the Board was entitled to immunity unless the legislature clearly and unambiguously waived that immunity. The Court found that chapter 271 applies only if there is (1) a written contract (2) stating the essential terms of the agreement, which (3) requires the contractor to provide goods or services to the governmental entity, and was (4) properly executed on the entity’s behalf. Examining the good-faith-effort clause, the Court reasoned that it was a promise to negotiate towards a future bargain in good faith and that, while some jurisdictions suggest that such a promise is legally enforceable, Texas precedent states that such promises are not enforceable. Because the promise to negotiate a future contract in good faith was not enforceable, the contract did not state the essential terms of a legally enforceable agreement that formed the basis of Vizant’s cause of action. The Court also found that even if the promise was legally enforceable, Vizant’s breach of contract claim sought consequential damages, which are not authorized under chapter 271. The Court found that the additional compensation Vizant sought may have “result[ed] naturally, but not necessarily, from the [Board’s] breach,” meaning the damages were consequential as opposed to actual. Therefore, the Court found that chapter 271 does not clearly waive the Board’s immunity.
No. 18-0508, In re N.G. — In this case, the Court considered an intermediate appellate court’s review of a parental termination judgment under Family Code section 161.001(b), which allows for involuntary termination of parental rights if clear and convincing evidence supports the finding that a parent engaged in one or more of twenty-one grounds set forth in the statute and that termination is in the best interest of the child. On appeal, the intermediate court can affirm the trial court’s judgment by upholding only one ground, as well as the best-interest finding, even if the trial court based the termination on more than one ground.
Here, the trial court based its parental termination order on three grounds – sections 161.001(b)(1)(D), (E), and (O) of Family Code. The appellate court held that the evidence was legally and factually sufficient to support the trial court’s judgment under section 161.001(b)(1)(O) and therefore declined to review the sufficiency of the evidence under section 161.001(b)(1)(D) or (E). In granting the petition for review, the Texas Supreme Court considered whether the mother was entitled to appellate review of the section 161.001(D) and (E) grounds because of the consequences those grounds could have on her parental rights to other children. In particular, section 161.001(b)(1)(M) provides that parental rights may be terminated if clear and convincing evidence supports the finding that a parent had her parental rights terminated with respect to another child based on a finding that the parent’s conduct violated paragraph (D) or (E). Thus, when a parent has her parental rights terminated under either section 161.001(b)(1)(D) or (E), that becomes a basis to terminate the parent’s rights to other children. For this reason, the mother argued she was entitled to appellate review of those grounds as a matter of due process and due course of law. In a per curiam opinion, the Court agreed, reasoning that an appellate court that declines to review a section 161.001(b)(1)(D) or (E) finding deprives the parent of a meaningful appeal and eliminates the parent’s only chance for review of a finding that will be binding as to parental rights to other children. The Court accordingly held that due process “requires a heightened standard of review of a trial court’s finding under section 161.001(b)(1)(D) or (E), even when another ground is sufficient for termination, because of the potential consequences for parental rights to a different child.” Further, if the court of appeals affirms termination on either of these grounds, it must provide a detailed analysis to support its holding. The Court therefore reversed and remanded the case to the intermediate appellate court.
No. 18-0734, In re Z.M.M. — This parental-termination case addresses the same issue as In re N.G., discussed above – i.e., whether an intermediate appellate court must review the sufficiency of a section 161(b)(1)(D) ground for termination, even if the court of appeals could affirm the order on a different ground. Based on its holding in In re N.G., in a per curiam opinion, the Court remanded this case to the intermediate court of appeals.
Posted by Rich Phillips, Melissa Davis, and Emily Fitzgerald
On Friday, May 10, 2019, the Supreme Court issued opinions in four argued cases (two of which were consolidated, so there is only one opinion for those two cases). This leaves the Court with 20 argued cases left to be decided before the summer recess.
This opinions issued today are:
No. 17-0365, Chambers-Liberty Counties Navigation Dist. v. State of Texas consolidated with No. 17-0404, In re Sustainable Texas Oyster Res. Mgmt., LLC — These consolidated cases arose from a dispute about whether the Texas Department of Parks and Wildlife has the exclusive authority to allow oyster cultivation on certain submerged land in and around Galveston Bay. The Chambers-Liberty Counties Navigation District leased the land to Sustainable Texas Oyster Resource Management, L.L.C. ("STORM"), and the State sued the District, its officers, and STORM, seeking both to invalidate the lease and to recover money damages under two provisions of the Natural Resources Code. The District filed a plea to the jurisdiction, arguing that the State's claims were barred by the District's governmental immunity. The trial court denied the plea, and the State appealed. STORM was not a party to the appeal in the court of appeals. The court of appeals reversed as to both the claim for damages and the claim to invalidate the lease. When the District sought review in the Supreme Court, STORM also filed a petition for review (in the same cause number) and filed a separate petition for a writ of mandamus.
In a unanimous opinion by Justice Blacklock (Justice Busby did not participate), the Supreme Court first held that the State's claim for money damages is barred by the District's governmental immunity. The Court rejected the State's argument that the only reasonable construction of the Natural Resources Code sections at issue is that the Legislature waived the District's immunity. The Court then analyzed the District's authority and the authority granted to the Parks and Wildlife Department and held that the State had pleaded a viable claim that the District's officers acted ultra vires in entering into the lease.
In addressing arguments raised by STORM, the Court first rejected STORM's request to be granted party status in the Supreme Court. The Court noted that STORM had not explained why the District did not adequately represent its interests or why STORM's arguments could not be adequately considered if they were made as an amicus curiae, rather than as a party. The Court also noted that STORM did not seek to be granted party status in the court of appeals. The Court also rejected STORM's mandamus petition because STORM had not sought any mandamus relief in the court of appeals first.
No. 17-0637, The Dallas Morning News v. Hall — Justice Brown wrote the opinion for the unanimous Court (Justice Busby did not participate) in yet another Texas Citizens Participation Act appeal, finding that this defamation case should be dismissed and remanding to the trial court for an award of fees. The Halls sued The Dallas Morning News after it published a series of articles about allegations of questionable practices in the compounding-pharmacy (“designer drug”) industry, several of which featured allegations relating to the Halls’ compounding-pharmacy business, RXpress. The articles related allegations made against RXpress in several lawsuits and stated that federal authorities were investigating RXpress regarding doctor kickbacks. The articles also reported an indictment and large-scale criminal investigation into compounding pharmacies generally. The Halls attributed two defamatory meanings to the articles: (1) RXpress was under investigation and (2) RXpress was guilty of committing a crime.
With respect to the first defamatory meaning, the Court determined that the Halls failed to present prima facie evidence that the articles’ contention that RXpress was under investigation was false. That allegation was based on a Department of Defense warrant to search the home of a pharmaceutical maker for, among other things, communications with the Halls or relating to RXpress. The Court rejected the Halls’ contention that the search warrant itself was evidence of the absence of an investigation. It also rejected their reliance on Hall’s affidavit stating that RXpress was not under investigation, that he’d not heard anything about an investigation, and that he’d inquired with law-enforcement officers and been told there was not an investigation. The Court stated that the fact that Hall was not aware of an ongoing investigation did not mean there was not one, and Hall could not rely on hearsay statements of law enforcement officers to establish personal knowledge. Finally, the Court rejected the Halls’ reliance on expert evidence of falsity, determining that no expertise was needed to understand the falsity evidence.
With respect to the second defamatory meaning, the Court held that the statements were statutorily privileged because the article conveyed allegations made in legal proceedings without juxtaposing them in a way that created a strong implication that the allegations were likely true.
No. 18-0071, Godoy v. Wells Fargo Bank, N.A. — In this debt-collection action, the Court reaffirmed that contractual waivers of statutes of limitations must be sufficiently specific to not be void as against public policy. GDG Mortgage, Inc. borrowed $250,000 from Wells Fargo’s predecessor Wachovia Bank, which was guaranteed by Gerald Godoy. The guaranty included a waiver of statutes of limitations and other defenses. GDG defaulted, and Wells Fargo foreclosed on the property. Wells Fargo purchased the property at the foreclosure sale in November 2011, but the purchase price was insufficient to satisfy GDG’s unpaid balance. In June 2015, Wells Fargo sued Godoy to recover the deficiency. Godoy moved for summary judgment, arguing that Wells Fargo’s debt-deficiency claim was barred by a two-year statute of limitations. Wells Fargo cross-moved for summary judgment, arguing that Godoy waived the two-year statute of limitations in the guaranty agreement. The trial court granted Wells Fargo’s motion. Godoy appealed, arguing that the waiver was void as against public policy. The court of appeals held that the guaranty waived the statute of limitations and Godoy failed to affirmatively plead his public-policy argument as a “matter constituting avoidance” under Texas Rule of Civil Procedure 94.
In a unanimous opinion by Justice Blacklock (Justice Busby did not participate), the Supreme Court held that the guaranty waived the two-year statute of limitations for the debt-deficiency claim because the waiver was sufficiently “specific” and tailored to “a reasonable time.” However, the Court held that other limitations waivers in the guaranty were unenforceable because they purported to completely waive all limitations periods. The Court clarified that blanket pre-dispute waivers of all statutes of limitation are unenforceable, but waivers of a particular limitations period for a defined and reasonable amount of time may be enforced. The Court addressed the Rule 94 issue, and noted that requiring a party to amend its answer just to make a purely legal argument during summary judgment briefing in support of an already-pleaded affirmative defense does not serve the purpose of the Rules of Civil Procedure. The Court ultimately did not decide whether Godoy was required to plead his public-policy argument under Rule 94 because Wells Fargo waived the alleged pleading error by not raising it in the trial court.
Posted by Rich Phillips, Melissa Davis, Stephanie Dooley Nelson, and Connor Bourland
In its order list issued on Friday, May 3, the Texas Supreme Court issued opinions in 7 argued cases. The Court did not grant any new petitions for review. With about 2 months left before the summer recess, the Court has 24 argued cases that it has not yet decided. If the Court continues its practice from the last few years, we expect that these opinions will all be issued before the end of June.
Unsurprisingly, the bulk of those 24 pending cases were argued in the last four months. But there are still two undecided cases from the October sitting, one from November, and two from December.
The opinions issued were:
No. 16-0874, Sorrell v. Estate of Benjamin Hardy Carlton, III — In this case, the Supreme Court interpreted a statute that allows a property owner to redeem property sold at a tax sale by tendering payment within a statutory deadline after the deed from the tax sale is recorded. To redeem, the property owner must tender: (i) the amount paid at the tax sale; (ii) the deed recording fee; (iii) the amount the purchaser paid in taxes, penalties, fees, and costs; and (iv) a redemption premium. Here, the landowner attempted to redeem by tendering payment for the amounts it could determine and offering to pay additional costs if the purchaser provided the information related to those costs. Thus, before the redemption deadline, the landowner had tendered about 88% of the amount owed and had offered to pay the rest.
In an opinion by Chief Justice Hecht, the Supreme Court first held that substantial compliance with the redemption statute is sufficient to redeem the property. In so holding, the Court distinguished the statute at issue here from the statute at issue in BankDirect Capital Finance, LLC v. Plasma Fab, LLC, 519 S.W.3d 76 (Tex. 2017). The Court reasoned that in BankDirect, the statute was clear, short, and focused on a single deadline, while the redemption statute is "exceedingly complex" and not focused solely on the redemption deadline. The Court also noted that since at least 1909, intermediate appellate courts had held that substantial compliance with the redemption statute was sufficient and the Legislature had not amended the statute to eliminate the possibility of substantial compliance. The Court then considered whether the landowner here had substantially complied with the statute. The Court held that because substantial compliance is a mixed question of law and fact, it is subject to review for abuse of discretion. For factual issues, the reviewing court defers to the trial court's findings as long as there is some evidence to support them. The reviewing court then determines whether the trial court properly applied the law to the facts. The Court reiterated that while "substantial compliance" lacks a comprehensive definition, it generally means "compliance with its essential requirements," Considering the totality of the circumstances, including that the landowner had paid all amounts it knew and had promised to promptly pay the rest, the Court concluded that the landowner had substantially complied with the statute.
No. 17-0345, Mosley v. Texas Health & Human Services Commission — The Court considered two issues in this case involving the Texas Administrative Procedures Act: (1) whether an appellant seeking judicial review of an administrative order must file a motion for rehearing with the administrative-law judge unless another statute plainly provides otherwise; and (2) whether an agency’s misrepresentation of the proper procedures to seek judicial review of an adverse order can violate the appellant’s due-process rights.
The administrative order at issue involved the Department of Aging and Disability Services’ (DADS’) Employee Misconduct Registry. The Texas Department of Family and Protective Services is tasked with investigating reports of “abuse, neglect, or exploitation of an elderly person or person with a disability.” Tex. Hum. Res. Code § 48.001. When it discovers any “reportable conduct,” the Department notifies the DADS, and DADS then adds the information to the Registry. Id. § 48.403. The Registry lists employees of DADS-licensed facilities who have been found to have committed “reportable conduct.” Being included on the Registry is effectively career ending.
After Mosley was investigated for an incident involving her care of a group-home resident, the Department confirmed a finding of “reportable conduct” and recommended Mosley’s name be added to the Registry. Mosley requested a hearing, which the Department delegated to the Health and Human Services Commission. The ALJ sustained the Department’s finding and sent Mosley a notice that its determination would become final “unless [she] timely petition[ed] for review.” The notice then explained the process for petitioning for review. That notice, however, quoted a regulation that was inconsistent with the law and failed to explain that filing a motion for rehearing was a prerequisite to seeking judicial review.
Relying on the notice, Mosley sought judicial review in the trial court without first filing a motion for rehearing. The Agencies filed a plea to the jurisdiction, arguing that the trial court lacked subject-matter jurisdiction because of Mosley’s failure to file a motion for rehearing. The Agencies conceded that the notice they sent Mosley was incorrect, but they contended that Mosley was charged with knowledge of the APA. The trial court overruled the Agencies’ jurisdictional pleas but found that substantial evidence supported the ALJ’s orders. Mosley appealed that ruling, and the Agencies cross-appealed the trial court’s jurisdictional ruling. The court of appeals reversed the trial court’s judgment on the jurisdictional issue and therefore did not consider the merits of Mosley’s appeal.
The Texas Supreme Court reversed. In a unanimous opinion by Justice Brown, the Court concluded that the APA requires an appellant to file a motion for rehearing with the administrative-law judge as a jurisdictional prerequisite to seeking judicial review of an administrative order. The Court then addressed whether the ALJ’s letter violated Mosley’s due-process rights. The Agencies contended that Mosley should have ignored the inaccurate instructions in the notice and followed the APA’s motion-for-rehearing process. The Court rejected the Agencies’ argument and held that the Agencies effectively misrepresented the steps Mosley needed to take to protect her interests and thereby prevented Mosley from filing a motion for rehearing. Because this violated Mosley’s due-course-of-law rights, the Court remanded the case to the Health and Human Services Commission to allow Mosley an opportunity to file her motion for rehearing.
No. 17-0603, In the Interest of A.L.M.-F. — This parental-termination case involves procedures related to associate judges. Texas law allows judges to refer cases to associate judges for a variety of matters, including trial on the merits. The referral is not binding on the parties, and if either party objects, the referring court will conduct a bench trial or preside at a jury trial. But absent an objection, the associate judge will determine the merits in either a bench or jury trial, subject to the parties’ post-trial right to a “de novo hearing” before the referring court within thirty days.
Here, the issue was whether a party who waives the right to a jury trial before the associate judge is entitled to a jury trial at the “de novo hearing” stage before the referring court under section 201.015 of the Family Code. The Department of Family and Protective Services filed a petition to terminate a mother’s parental rights to her five children. The trial court referred the case to an associate judge for adjudication on the merits. The parties did not object to the referral, and they waived their right to a jury trial. After a bench trial, the associate judge found sufficient grounds to terminate the mother’s parental rights and that termination was in the best interests of the children. After receiving the associate judge’s report, the mother demanded a jury trial and requested a de novo hearing before the referring court. The referring court denied the mother’s request for a jury and instead held a de novo hearing in which the transcripts and exhibits from the associate-judge proceedings were admitted into evidence, but no live witnesses were called to testify. After the hearing, the referring court terminated the mother’s parental rights. The court of appeals affirmed.
In the Texas Supreme Court, the mother contended the Family Code guarantees that parties can demand at least one jury trial at any stage of the trial-court proceedings, and the trial court therefore erred in failing to grant her first-time jury demand at the de novo hearing stage. The Department countered that the Family Code permits, but does not require, a referring court to grant a first-time jury trial in a de novo proceeding.
In a unanimous opinion by Justice Guzman, the Texas Supreme Court agreed with the Department. The Family Code affords the right to a jury trial on demand before the referring court or the associate judge. Here, the mother elected to have a bench trial before the associate judge and gave up her right to a jury trial. The Court concluded that the Family Code does not confer a right to demand a jury trial in a de novo hearing following a bench trial before an associate judge, although the referring court has discretion to grant a first-time jury trial at that stage of the proceedings.
No. 17-0713, Garcia v. City of Willis — This appeal arises from a putative class-action challenge to the City of Willis's red-light camera system and the state statutes allowing their use. The Court addressed whether (1) the plaintiff (Garcia) had standing to bring his prospective claims for declaratory and injunctive relief regarding the constitutionality of the statutes and ordinances authorizing the red-light cameras; (2) whether Garcia’s retrospective claim for reimbursement of his fine was barred by governmental immunity; and (3) whether Garcia was required to exhaust administrative remedies before bringing his constitutional takings claim in district court. In response to Garcia's petition, the City filed a plea to the jurisdiction, raising governmental immunity and failure to exhaust administrative remedies defenses (among others). The trial court denied the plea, but the Beaumont Court of Appeals reversed, finding that Garcia was required to exhaust his administrative remedies for his prospective claims and that his retrospective claim for reimbursement was barred by governmental immunity.
In an opinion by Justice Brown, the Supreme Court affirmed, albeit under a different rationale. The State of Texas, appearing as amicus curiae, argued that Garcia lacked standing to bring his claims for prospective relief and that Garcia’s reimbursement claim could not overcome governmental immunity because he did not pay his fine under duress. The Court agreed. Because Garcia had already paid his fine, he had no concrete or particularized stake in the validity of the future application of the ordinance and statutes. Had Garcia alleged that he planned to continue violating the ordinance or had he failed to pay his fine, the Court noted, he would have a concrete and particularized injury sufficient to sustain his claims for prospective relief. Without such an injury, his interest was indistinguishable from that of a member of the general public. The Court, therefore, dismissed his prospective claims for lack of standing. As to Garcia’s claim for reimbursement, the Court found that Garcia’s claim could not overcome the City’s governmental immunity. While there is an exception to immunity for claims of reimbursement where the plaintiff is forced to pay an allegedly unlawful tax, fee, or penalty involuntarily or under duress, the Court found that Garcia voluntarily paid his fine and could not later claim that he paid it under duress. Finally, the Court addressed whether Garcia was required to exhaust his administrative remedies before bringing a constitutional-takings claim in district court. The Court decided not to address whether the red-light-camera statutory scheme generally requires a plaintiff to exhaust his administrative remedies. Instead, the Court found that Garcia was required to avail himself of any statutory remedy that could moot his takings claim. The Court noted that while an administrative hearing may not have resolved all of Garcia’s claims, it is possible that such a hearing might have resulted in Garcia’s fine being waived, which would have mooted his takings claim. Because an administrative hearing may have obviated the need for a takings suit, Garcia was required to exhaust his administrative remedies and his claims were dismissed.
No. 17-0925, Endeavor Energy Resources, L.P. v. Cuevas — In this case, the Court was again asked to address the scope of Texas Civil Practice and Remedies Code chapter 95, which applies to claims for damages caused by negligence that “arises from the condition or use of an improvement” to the property, and limits the property owner’s liability to situations in which the owner had actual knowledge of the danger or condition that caused the injury. The issue in the case is whether Chapter 95.applies to a negligent-hiring claim against a property owner. Endeavor hired Big Dog Drilling to drill a well. Cuevas, a Big Dog employee, died because of injuries sustained while working on the property. Cuevas’s survivors filed a variety of negligence and premises-liability claims, including a negligent-hiring claim. The trial court held that Chapter 95 barred each claim because Endeavor did not have actual knowledge of any dangerous condition on the worksite. The Eastland Court of Appeals reversed as to the negligent-hiring claim, reasoning that Chapter 95 did not apply because the negligent act occurred prior to, as opposed to contemporaneously with, the injury, meaning the negligence did not arise from the use of an improvement to the property. In a unanimous opinion by Justice Boyd, the Supreme Court reversed. The Court noted that a negligent-hiring claim requires two negligent acts: negligent hiring of the employee and a subsequent negligent act by the employee. Where a claim requires proof of two separate negligent acts, the Court found, it is sufficient that only one of the negligent acts involves contemporaneous use of an improvement on the property. Where that is the case, the claim arises from the use of the improvement, “regardless of when the other negligent act occurred or whether it involved the use of an improvement.” Therefore, Chapter 95 applied and Cuevas’s negligent-hiring claim was barred by law.
No. 17-1003, Brazos Electric Power Cooperative, Inc. v. Texas Commission on Environmental Quality — In a unanimous opinion for the Court, Justice Lehrmann held that the TCEQ had no discretion to deny an ad valorem tax exemption for Brazos Electric’s heat recovery steam generators (HRSGs). HRSG increase the efficiency of electric power plants by capturing waste heat and using it to produce additional electricity, thus reducing the amount of pollution produced per unit of electricity. Texas Tax Code section 11.31 provides a proportional property tax exemption for property that is used wholly or partly for pollution control. This tax exemption is administered by the TCEQ. In 2007, the Legislature added a list of specific types of pollution-control property (the “k-list”), including HRSGs, and created an expedited TCEQ review process for property on the list. When Brazos Electric applied for exemptions for HRSGs at two of its Texas power plants, the TCEQ concluded that the economic benefits of the HRSGs outweighed their environmental use and denied any exemption. The trial court and El Paso Court of Appeals affirmed, but the Supreme Court reversed, concluding that the k-list reflected the Legislature’s determination that HRSGs are used wholly or partly for pollution control, such that they were necessarily exempt in whole or in part, and the TCEQ had no discretion to conclude otherwise. In a footnote, the Supreme Court also rejected the El Paso Court of Appeals’ conclusion that, although this case was transferred from Austin to El Paso, it was not bound by an earlier decision of the Austin Court of Appeals (discussed below) because a motion for rehearing was pending in that case. (In the interest of full disclosure, Thompson & Knight represented the petitioner in this case and Thompson & Knight lawyer Melissa Davis argued the case in the Supreme Court.)
No. 18-0128, Texas Commission on Environmental Quality v. Brazos Valley Energy, LLC — This case presents the same question presented in Brazos Electric, but the Austin Court of Appeals reached the opposite conclusion as the El Paso Court of Appeals. Thus, in light of the reasoning in Brazos Electric, the Supreme Court (in a short unanimous opinion by Justice Lehrmann) affirmed the court of appeals' decision in this case.
Posted by Rich Phillips, Melissa Davis, Stephanie Dooley Nelson, Emily Fitzgerald, and Connor Bourland
On April 12, the Texas Supreme Court issued decisions in four argued cases:
No. 17-0095, Tarrant Regional Water Dist. v. Johnson — In this case, the Court addressed whether the discretionary function exception in the Texas Tort Claims Act preserved the Tarrant Regional Water District’s governmental immunity from wrongful death claims brought by the Johnsons when their daughter drowned after slipping off a dam maintained by the District. The District argued that the discretionary function exception shielded the District from liability arising from discretionary decisions related to the design of the dam. The district court denied the plea; the Fort Worth Court of Appeals reversed in part, finding that most of the Johnsons’ claims were barred, but that the claim relating to the possibility of a “hydraulic boil” was based on the District’s alleged failure to maintain the dam and that the discretionary function exception did not apply to claims based on “failure to maintain.” In an opinion by Justice Blacklock, the Supreme Court reversed, finding that the discretionary function exception applied to Johnsons’ remaining claim and that the District was immune from suit. The Court found that the court of appeals’ distinction between design and maintenance ran afoul of the statute’s textual distinction between discretionary and non-discretionary government decisions. The purpose of the statute, the Court noted, is the “preservation of the government’s discretionary decision-making authority.” With that in mind, the Court found that the potential “hydraulic boil” was the result of intentional design decisions and discretionary decisions about how to maintain the dam and that the Court has “never held that decisions about how to conduct maintenance on a public work can never rise to the level of a [discretionary decision] protected by section 101.056.”
No. 17-0509, Tex. Outfitters Ltd., LLC v. Nicholson — In this oil and gas case, the Court examined the scope of the duty of utmost good faith and fair dealing that the holder of the executive right to lease a mineral estate owes to non-participating interest owners when the executive refuses to lease in contravention of the non-executive’s wishes. Texas Outfitters owned the surface estate, a 4.16% mineral interest, and executive rights to a 45.84% mineral interest on an approximately 1,000 acre tract. The Carter family owned the other rights related to the 45.84% interest. In 2010, the owners of the other 50% mineral interest leased their interest to El Paso Oil Exploration & Production Company for $1,750-per-acre bonus and a 25% royalty. El Paso made the same offer to Texas Outfitters for the remaining 50% mineral interest. The Carter family wanted to accept the offer, but Texas Outfitters refused. The evidence showed both that Texas Outfitters “wanted to see how the play matured and try to get more money,” and that Texas Outfitters “planned not to lease because of [its] business of a hunting lease for bringing in hunters.” Texas Outfitters subsequently received two offers to lease with higher bonuses, but both offers were withdrawn by the lessees after learning of El Paso’s existing lease. Texas Outfitters eventually sold the surface, free of any mineral lease. The Carters brought a claim against Texas Outfitters for breaching its executive duty. In a majority opinion by Justice Lehrmann, the Court agreed with Texas Outfitters that an executive generally does not breach the duty by declining a lease in honest anticipation of obtaining better terms for all. But the Court held that legally sufficient evidence supports the trial court’s finding that Texas Outfitters took a gamble knowing that the pool of potential lessees had diminished and that refusing the lease benefited Texas Outfitters’ surface interest to the Carters’ detriment. The Court specified that “we cannot and do not say that an executive primarily interested in the surface necessarily breaches his duty by engaging in conduct that benefits the surface but not the mineral estates, we conclude that legally sufficient evidence supports the trial court’s finding that Texas Outfitters did so in this case.” The Court reiterated that whether the plaintiff proved that the defendant engaged in self-dealing that unfairly diminished the value of the plaintiff’s non-executive interest remains a fact-dependent inquiry.
No. 17-0552, Tex. Dept. of Criminal Justice v. Levin — In this case, the Court considered whether the public’s right to information under the Texas Public Information Act (PIA) is subject to reasonable limitations when disclosure of the information may lead to physical harm to an unknown target. Levin sought disclosure of the identity of the pharmacy that supplied drugs used in state executions by lethal injection. The Department resisted, contending that the information was excepted from disclosure under the Cox physical-safety exception set forth in Texas Department of Public Safety v. Cox Texas Newspapers, LP, 343 S.W.3d 112, 114–15, 118 (Tex. 2011). Under Cox, information is excepted from disclosure “if, under the specific circumstances pertaining to the [government] employee or officer, disclosure of the information would subject the employee or officer to a substantial threat of physical harm.”
In a unanimous opinion by Justice Green (Justice Guzman and Justice Blacklock did not participate in this case), the Court first held that the Cox physical-safety exception applies even if the potential target was unknown. While Cox involved threats to a known target (then-Governor Rick Perry), in this case, the target of the threats was unknown because the Department had kept the identity of the pharmacy secret. The Court clarified that the issue is whether the fact that the public knows that “the Department is receiving lethal injection drugs from some source, whoever it might be, is enough to conclude that a substantial threat of physical harm will come to bear on the source of the drugs,” if its identify is revealed.
In applying that standard, the Court clarified that Cox’s use of the term “substantial” refers to the degree of the potential threat of harm – not the degree to which harm is likely to occur. After analyzing the Department’s summary-judgment evidence, the Court determined that the Department had met its burden to show a substantial threat of physical harm to the pharmacy if its identity were revealed. The Court therefore rendered judgment for the Department.
The Court also observed that, while this case was in the court of appeals, the Legislature had enacted an exception to the PIA that makes confidential the identity of any person or entity that provides drugs used for lethal injection to the State. Because the amendment was prospective only, it did not apply to this case.
No. 17-0901, Ferreira v. Butler — The issue in this probate dispute was whether probate of a will was barred by Texas Estate Code section 256.003(a)’s four-year limitations period or allowed by an exception applicable when “the applicant for the probate of the will was not in default in failing to” timely probate the will. Norman Ferreira’s second wife’s will left her entire estate to him, but he never probated the will and her estate was distributed intestate to her children from another marriage, Douglas and Debra Butler. After Norman died, his first wife, Linda Ferreira, found and probated (1) a will in which Norman left his estate to her and (2) Norman’s second wife’s will as a muniment of title. Under these wills, Linda claimed the property distributed to Douglas and Debra actually belonged to Norman and thus was left to her. The trial court and court of appeals agreed with Douglas and Debra that the probate of Norman’s first wife’s will was time barred under Faris v. Faris, 138 S.W.2d 830, 832 (Tex. App.—Dallas 1940, writ ref’d), which held that a devisee’s default is imputed to his own devisee. In this unanimous opinion by Justice Hecht (Justice Busby not participating), the Court overruled Faris and held that under the plain language of the statute, only the conduct of “the applicant,” in the capacity in which the application is brought, is considered in determining default. The Court expressly rejected a test applied by the Amarillo Court of Appeals that considered whether permitting late probate would work an injustice or frustrate the intent of the testator. Because Linda applied to probate Norman’s second wife’s will in her capacity as Norman’s executor, the Court held that Norman’s failure to probate his second wife’s will barred her claim. The Court recognized that if Linda could have applied to probate Norman’s second wife’s will in her individual capacity, and if she had done so, Norman’s default in failing to probate his second wife’s will would not matter. The Court declined to confer a capacity on Linda she had not pleaded, but it did remand the case to the trial court to give Linda an opportunity to amend her pleadings to apply in her individual capacity.
On April 26, the Court issued opinions in four argued cases and one per curiam opinion:
No. 16-0006, Rohrmoos Venture v. UTSW DVA Healthcare, LLP — In this landlord-tenant dispute, the Court addressed two primary issues: (1) whether any material breach of the lease by the landlord can support termination or only a breach of the implied warranty of suitability and (2) whether there was sufficient evidence to support the trial court's attorney-fee award. In a unanimous opinion by Justice Green, the Court first rejected the landlord's argument that under Davidow v. Inwood North Professional Group-Phase I, 747 S.W.2d 373 (Tex. 1988), only a breach of the implied warranty of suitability can support termination of a commercial lease by the tenant. The Court rejected the landlord's argument that Davidow stands for the proposition that a tenant's obligation to pay rent is dependent only on the implied warranty of suitability. While Davidow addressed the implied warranty of suitability, it did not restrict termination to breach of that warranty. Instead, the Court held, termination is an available remedy for any material breach of the lease by the landlord.
The Court then addressed the sufficiency of the evidence to support the trial court's attorney-fee award to the landlord. In a lengthy discussion, the Court summarized and clarified the interaction of the "lodestar" method and the Arthur Anderson factors for proving reasonable and necessary attorney's fees. The Court stated that the lodestar method is a "short hand version" of the Arthur Anderson factors and the two were never meant to be separate routes to proving fees. The Court then clarified that testimony about an attorney's experience, the total amount of the fee, and the reasonableness of the fee is not sufficient to support a fee award. Rather, the party seeking fees has the burden to prove the reasonable hours worked multiplied by a reasonable hourly rate. At a minimum, this requires evidence of (i) the services performed; (ii) who performed them; (iii) approximately when they were performed; (iv) the reasonable amount of time spent to perform them; and (v) the reasonably hourly rate for the person performing them. The Court reiterated that the reasonableness of the fee will not be dependent "solely on the contractual fee arrangement" with the prevailing lawyer. There must be evidence that the contractual fee is reasonable. The Court then held that the fee resulting from this process is presumptively reasonable and is subject to adjustment up or down only based on evidence of factors other than those already incorporated into the reasonable-fee determination. Finally, while contemporaneous billing records are not required, they are "strongly encouraged" (emphasis in original). The Court then held that the fee evidence presented by the landlord in this case was not sufficient to support the fee award and remanded the case for a redetermination of the fee.
No. 17-0498, Medina v. Zuniga — Justice Brown wrote the Court’s unanimous opinion (Justice Busby did not participate) holding that the trial court erred by sanctioning a party who denied requests for admission of negligence during discovery but admitted negligence in opening statements at trial. The Court reversed the sanctions order, which required the defendant to pay attorney’s fees incurred by the plaintiff in proving negligence. The Court held that a party has a legal right to deny liability and should not be sanctioned for exercising that right in discovery even if he later concedes liability. The Court observed that requests for admission were designed to eliminate “uncontroverted matters or evidentiary ones like the authenticity or admissibility of documents,” not to compel a party to concede the ultimate validity of their claims or defenses. In fact, the Court stated that while merits-preclusive requests for admission are not “strictly speaking, prohibit[ed],” the “very nature of [such a] request provides the respondent ‘good reason’ for failing to admit.” The Court warned that deemed admissions that have merits-preclusive effect can amount to death-penalty sanctions, and held that the same due-process concerns are triggered when a party seeks sanctions for denying merits-preclusive requests for admissions — even when, as here, the sanctions awarded were only attorney’s fees, not disposition of a claim or defense.
The Court also held that the evidence in this case was not legally sufficient to support the jury’s gross-negligence finding. Applying existing gross-negligence standards, the Court reiterated that gross negligence must remain functionally distinct from ordinary negligence. The Court also noted that “our roads are replete with thoughtless, careless, and risky drivers,” indicating driving thoughtlessly, carelessly, and recklessly does not alone establish gross negligence.
No. 17-0563, Baylor Scott & White Hillcrest Medical Center v. Weems — In this case involving the Health Care Liability Act, the Court again addressed whether a plaintiff’s failure to timely serve an adequate expert report required dismissal of his case with prejudice. The plaintiff, Weems, was indicted for aggravated assault by shooting or striking Ernest Bradshaw. Weems sued Baylor Scott and White, Hillcrest Medical Center (the “Hospital”), alleging that Weems was indicted only because the nurse who treated Bradshaw after the incident had falsified Bradshaw’s medical records by describing Bradshaw’s injury as a “point-blank” “gunshot wound” to the head. Weems maintained that Bradshaw had not been shot, and that the nurse intentionally falsified Bradshaw’s record because the police pressured her to do so. Weems asserted a claim against the Hospital for intentional infliction of emotional distress.
The trial court held that Weems’s claim fell with the scope of the Health Care Liability Act and dismissed the case with prejudice when Weems failed to timely file an adequate expert report. The court of appeals reversed and remanded, holding that claims involving alteration and fabrication of medical records are not healthcare liability claims and therefore do not trigger the expert report requirement.
Noting that there was a split in the intermediate appellate courts on this issue, the Texas Supreme Court granted the petition and held that such claims are subject to the expert report requirement. In an opinion by Justice Guzman, after analyzing the plaintiff’s allegation and the requirements of the statute, the Court held that the gist of Weems’s petition was that Bradshaw’s medical record was inaccurate, which is contrary to accepted standards of medical or administrative services. Accordingly, the claim fell within the statutory definition of a “health care liability claim,” even though Weems had not alleged a departure from the standard of care. Nor was it relevant that Weems had alleged that the nurse’s actions were intentional, because the statute does not distinguish between departures that are intentional or negligent. The Court therefore reversed the court of appeals and rendered judgment in favor of the Hospital.
No. 18-0099, PHI, Inc. v. Tex. Juvenile Justice Dept. — In this interlocutory appeal, the Court addressed whether sovereign immunity barred a helicopter owner’s claim for damage resulting from the State’s alleged failure to act with ordinary care in maintaining and operating a van. PHI is a private company that provides medical helicopter services. PHI owned a helicopter that flew to North Texas Regional Medical Center to transfer a patient. While the helicopter crew was securing the patient and preparing for takeoff, a van owned by the Texas Juvenile Justice Department rolled down an incline from where it was parked and crashed into the elevator. PHI alleged that the driver failed to engage the emergency brake when parking the vehicle, among other allegations of the Department’s failure to maintain the van. The for the Court centered on whether the damage to the helicopter arose from the “operation or use” of the van, such that the Tort Claims Act’s waiver of sovereign immunity for damage arising from the operation or use of a motor-driven vehicle applied. In a unanimous opinion by Justice Blacklock, the Court held that the damage arose from the “operation or use” of the van, so sovereign immunity was waived under the Tort Claims Act. In rejecting arguments that damage arising after the van was parked cannot be attributable to the operation or use of the van, the Court stated that it is “self-evident that ensuring your car will not roll away after you leave it, including engagement of the emergency brake when necessary, is an integral part of the ‘operation or use’ of a vehicle.” The Court discussed its precedent addressing “operation or use” and held that this precedent is consistent with its holding here.
No. 18-0278, Barnett v. Schiro — In this per curiam opinion, the court reversed the court of appeals' judgment and remanded the case to the trial court for a redetermination of attorney's fees in light of the Court's opinion in Rohrmoos Venture (summarized above).
Posted by Rich Phillips, Stephanie Dooley Nelson, and Connor Bourland
In its weekly orders on Friday, April 5, 2019, the Texas Supreme Court issued opinions in three argued cases. The Court did not grant any new cases for review. Justice Busby did not participate in any of these opinions.
The opinions are:
No. 17-0454, West v. Quintanilla — In this interlocutory appeal from an anti-SLAPP motion, the Court considered the contours of the parol-evidence rule. The plaintiff alleged that after he satisfied his debt to the defendant, the defendant nonetheless filed fraudulent liens and slandered the plaintiff’s title to certain mineral interests. The defendant filed a motion to dismiss under the Texas Citizens Participation Act, but the trial court denied it. The court of appeals, however, held that the plaintiff failed to meet his burden under the TCPA to prove a prima facie case for his claims because the parol-evidence rule barred consideration of the plaintiff’s evidence that he had satisfied the debt at issue. The Texas Supreme Court disagreed. In an opinion by Justice Boyd, the Court discussed the requirements of the parol-evidence rule at length and noted that the rule does not preclude enforcement of an agreement that is “collateral” to and “not inconsistent” with the agreement at issue. Because the plaintiff’s evidence that he had satisfied the debt fell under this collateral-and-consistent exception, the court of appeals erred in relying on the parol-evidence rule to bar the enforcement of the plaintiff’s evidence. Having rejected the court of appeals’s sole basis for dismissing the plaintiff’s claims under the TCPA, the Court remanded the case to the appellate court to consider the other issues it had not reached.
In addition to its extensive discussion of the “collateral-and-consistent” exception, the Court addressed head-on the difference between the parol-evidence rule and the contract-construction rule that bars consideration of evidence to modify or add to unambiguous contract language. Noting that the two rules are “easily confused and conflated,” and that the Court had been “less than precise in distinguishing the two rules,” the Court explained that the parol-evidence rule applies when “a contract is written and integrated.” The contract-construction rule, in contrast, applies “when a contract is written and unambiguous.”
No. 17-0501, Texas Mutual Insurance Co. v. Chicas — In this case, the Court addressed whether Labor Code section 410.252(a) (requiring a party dissatisfied with a decision of a Division of Workers’ Compensation appeals panel to seek judicial review within 45 days) is jurisdictional. Chicas sought workers’ compensation benefits after her husband died, but the Division of Workers’ Compensation found for Texas Mutual after the insurance company disputed Chicas’s claim. Chicas sought review in district court after the mandatory 45-day window, and the district court granted Texas Mutual’s plea to the jurisdiction. Chicas appealed, and the court of appeals reversed. In an opinion by Justice Brown, the Supreme Court affirmed, finding that the statute was not jurisdictional. The Court reasoned that while a statute may be mandatory, it is not necessarily jurisdictional, and that the Court “presume[s] the legislature did not intend to make a provision jurisdictional” absent “clear contrary legislative intent.” In reaching its decision, the Court examined (1) the plain meaning of the statute, (2) whether the statute contains specific consequences for noncompliance, (3) the purpose of the statute, and (4) the consequences that would result from each possible interpretation of the statute. The Court found that the plain text of the statute did not indicate any legislative intent that the statute be jurisdictional, that the statute did not require dismissal for failure to comply, that the purpose of the statute was not to deprive courts of jurisdiction in certain cases, and that interpreting the statute as jurisdictional would “leave final judgments vulnerable to attack on the ground that the deadline was not met.”
No. 17-0630, Agar Corp. v. Electro Circuits Int'l, LLC — In this case, the Supreme Court was asked to determine the proper statute of limitations period for a claim for civil conspiracy. Plaintiff Agar Corporation sued several defendants, asserting claims based on an alleged scheme to produce knock-off products. In an amended petition, Agar added claims against Electro Circuits and its owner under various tort theories and asserting a claim for civil conspiracy. Electro and its owner obtained summary judgment based on limitations and the court of appeals affirmed. The Supreme Court granted review to determine the proper limitations period for a claim of civil conspiracy. The issue is whether civil conspiracy is an independent tort to which the general two-year limitations period should apply uniformly or a derivative claim, for which the limitations period should be the period for the underlying claim. In an opinion by Justice Devine, the Supreme Court held that it is a derivative claim and that the proper limitations period is the period for the underlying tort. The Court also held that a claim for civil conspiracy accrues when the claim for the underlying tort accrues, instead of when the last overt act of the conspiracy occurs.
With these cases decided, there are 39 cases that have been argued, but not decided. We expect the Court to work to get all of the remaining cases decided by early July. There is one case left from the Court's September sitting and several cases from each of the sittings from October through March.