The U.S. Supreme Court has released its decision in Gunn v. Minton, No. 11-1118 (opinion docket), reversing the decision from the Texas Supreme Court.

This is a legal malpractice suit about a patent issue. The defendant argued that the presence of an issue over which federal courts had special jurisdiction (patent law) meant that Texas state courts lacked the power to render a complete decision. The Texas Supreme Court agreed, concluding that the appeal raised an issue of federal law over which Texas courts had no authority and thus should defer to federal courts. The U.S. Supreme Court accepted the case for review and heard arguments in January.

Chief Justice Roberts wrote today for a unanimous Court, holding that federal law did not in these circumstances require the Texas legal-malpractice claim to have been brought in federal court. The Court thus reversed the Texas Supreme Court’s 6-3 decision in Vernon F. Minton v. Jerry W. Gunn, Individually, Williams Squire & Wren..., No. 10-0141 and remanded to the Texas state courts for further proceedings.

The nub of the reasoning begins at page 8 of the slip opinion, which frames the relevant test as whether the particular issue of federal law involved here was substantial to the federal system (not to the parties):

Minton’s argument founders on [Grable & Sons Metal Products, Inc. v. Darue Engineering]’s next requirement, however, for the federal issue in this case is not substantial in the relevant sense. In reaching the opposite conclusion, the Supreme Court of Texas focused on the importance of the issue to the plaintiff’s case and to the parties before it. … As our past cases show, however, it is not enough that the federal issue be significant to the particular parties in the immediate suit; that will always be true when the state claim “necessarily raise[s]” a disputed federal issue, as Grable separately requires. The substantiality inquiry under Grable looks instead to the importance of the issue to the federal system as a whole.

Having thus reframed the dispute between these parties into a vastly bigger context — the federal system, and federal-state relations — the Court concluded that there was no bar to the Texas courts adjudicating this claim.

This may be, in part, because it was an unusually retrospective kind of claim — legal malpractice — which involves determining hypothetical questions in the past tense about what might have happened in litigation. Any holdings that state courts might reach in such a narrowly defined context are unlikely to disturb the uniformity of federal patent law. See slip op. 9-10.

The Court also rejected the argument that the unique expertise of the Federal Circuit was a reason for the federal courts to be the exclusive forum for patent-malpractice cases. See Slip op. 11-12. The Court’s reasoning here again echoed the opinion’s theme: “[T]he possibility that a state court will incorrectly resolve a state claim [malpractice] is not, by itself, enough to trigger the federal courts’ exclusive patent jurisdiction …. [R]esolution of a patent issue in the context of a state legal malpractice action can be vitally important to the particular parties in that case. But something more, demonstrating that the question is significant to the federal system as a whole, is needed.” (( In that regard, this case is really about which funnel patent cases must follow toward uniformity. The patent issues present in some state claims may no longer have a direct path to the federal circuit. But an interesting enough substantive question about patent law could nonetheless make its way to the U.S. Supreme Court by means of certiorari to the state courts (just as in this case). ))

The immediate effect of Gunn v. Minton is of course to clarify that state courts can resolve legal-malpractice issues that touch upon federal patent law.

More interesting to appellate lawyers, perhaps, is how the Court shifted the focus of a jurisdictional inquiry from analysis of the parties’ claims to a broader question that, to my eyes, reads more like a discussion of discretionary review. The focus in the Chief Justice’s opinion is on whether the issue is important to federal jurisprudence, something that echoes how the Supreme Court resolves cert petitions. Indeed, the opinion employs some argumentative devices that one might find in a solid Brief in Opposition arguing against the Court taking certiorari of a state-law patent issue:

• the evergreen argument that “If the question arises frequently, it will soon be [presented in a better case, in federal court]”, slip op. 10;

• explaining how rarely state court decisions about federal issues are viewed as authority in federal court or by federal agencies, slip op. 11; and

• explaining that, even if there were some issue preclusion from a mistake made by a state court about a patent-law issue, that effect would be limited to the parties and thus not important to the jurisprudence, slip op. 11-12.

I do not envy the state court having to guess which claims might, at the margin, meet that test.

But although the edges of this jurisprudential test are perhaps less crisply defined than before, the Supreme Court’s framing results in such a smaller zone of preemption that, for most cases involving routine disputes, it will not matter precisely where the line falls.

The most recent challenge to the Texas franchise tax system comes up short on today’s orders list. That was the only decision issued by the Court; it did not grant review in any new cases.

IN RE NESTLE USA, INC., No. 12-0518

Opinion of the Court

Dissenting

Divided 6-2, the Texas Supreme Court upheld the state franchise tax (now known as the “margins tax”) against a constitutional challenge brought by Nestle.

Read (much) more

The big news of the day comes from the U.S. Supreme Court, which has granted review of Gunn v. Minton, No. 11-1118, a case originating from the Texas Supreme Court:

VERNON F. MINTON v. JERRY W. GUNN, INDIVIDUALLY, WILLIAMS SQUIRE & WREN, L.L.P., JAMES E. WREN, INDIVIDUALLY, SLUSSER & FROST, L.L.P., WILLIAM C. SLUSSER, INDIVIDUALLY, SLUSSER WILSON & PARTRIDGE, L.L.P., AND MICHAEL E. WILSON, INDIVIDUALLY, No. 10-0141

Opinion of the Court

Dissenting

This was the case about whether state courts could hear a claim for malpractice involving a patent or whether federal courts have exclusive jurisdiction. Divided 5-3, the Texas Supreme Court held that the federal courts had exclusive jurisdiction.

The U.S. Supreme Court will take up that question early next year.

Jane Webre is counsel of record for Gunn and the other petitioners in the U.S. Supreme Court.

As the Court gets ready to begin its fall argument calendar, you might be wondering which Texas Supreme Court cases were argued last term but are still awaiting an initial decision on the merits. (No cases are left from previous terms.)

I count seven, which are listed below. This total is roughly the same as last year.

Read this year’s list

As noted over on 600camp.com, the Fifth Circuit has just certified a question to the Texas Supreme Court about the at-will employment doctrine in Texas.

The case involves former the employees at a DuPont facility in LaPort, Texas who were covered by a collective-bargaining agreement. Their claim is that they were fraudulently induced to give up their employment with DuPont and instead enter employment with “DTI,” a newly formed subsidiary. (The fraud theory appears to be that DuPont knew it was planning to sell DTI but represented the opposite to its employees.)

The panel originally decided 2-1 in favor of DuPont, making an Erie guess that Texas law would bar these claims. It reasoned that the existing contract was not sufficient to remove them from “at will” status under Texas law. Judge Elrod dissented, taking issue with the majority’s analytical framework: “There is no such thing as somewhat at-will, or as the majority puts it ‘sufficiently non-at-will.’ In fact, the majority’s conclusion brings to mind Miracle Max’s diagnosis that Westley was ‘mostly dead.'”

On Friday, the Fifth Circuit withdrew its opinion and issued an order certifying two questions to the Texas Supreme Court:

1. Under Texas law, may at-will employees bring fraud claims against their employers for loss of their employment?

2. If the above question is answered in the negative, may employees covered under a 60-day cancellation-upon-notice collective bargaining agreement that limits the employer’s ability to discharge its employees only for just cause, bring Texas fraud claims against their employer based on allegations that the employer fraudulently induced them to terminate their employment?

See: Gary Sawyer, Doug Kempf, Peter Barnaba, Sr., Geoff Rorrev, Tim Gregory, et al. v. E. I. Du Pont de Nemours and Company, No. 12-0626

You may remember In re Nestle USA, Inc., No. 11-0855 (DB), one of this term’s cases challenging the Texas business-margins tax.

The first of those cases was In re Allcat Claims Services, No. 11-0589 (DB), which argued that the tax was actually an income tax and thus was invalid under the Texas Constitution without an additional public vote. The Court rejected the substance of that challenge last November. Along the way, the Court split 7-2 about how to interpret a statute that granted the Court authority to resolve these questions — but set an unusual 120-day deadline on its consideration of them. The majority held that, although the Legislature lacked power to confer jurisdiction beyond the boundaries set in the Texas Constitution, this could still qualify under the Court’s more general mandamus jurisdiction. (( The Court issued its opinion within 120 days and thus the majority did not have to resolve whether the Legislature’s attempt to impose a time limit on these challenges was also valid. ))

A few months later, the Court resolved In re Nestle, which was brought under the same legislative grant. This case challenged the legality of how the Texas margins tax is calculated (rather than how the statute was enacted). The Court ruled that it lacked jurisdiction to consider Nestle’s claim because the taxpayer had not paid the tax under protest, as the statute requires in a typical tax case.

Now, Nestle is back. It paid the tax under protest and, on June 25, 2012, filed a new mandamus proceeding styled In re Nestle USA, Inc., No. 12-0518 (DB). The Court is proceeding on an accelerated schedule similar to before. It requested a response from the Comptroller, which was filed on July 3, 2012. The Court requested full briefing on the merits on July 5, 2012.

The thrust of Nestle’s argument is that the margins tax violates the requirement that taxes be “equal and uniform,” in particular by varying which expenses a taxpayer can deduct based on its line of business. The petition also argues that setting a 0.5% rate for retailers and wholesalers is unconstitutional when other taxpayers are subjected to a 1.0% rate. You can read the mandamus petition and response.

The Court has not yet selected this petition for oral argument. If chosen, its argument date is likely to be in September, so that the Court can once again beat the Legislature’s 120-day clock.

With today’s orders list, the Texas Supreme Court issued a per curiam opinion explaining its March 28th order in the Palomo elections case.

In re Rebecca Ramirez Palomo, No. 12-0208 (per curiam)

On March 28th, the Texas Supreme Court ordered that a judicial candidate (Rebecca Ramirez Palomo) be returned to the primary ballot. I wrote a short post about the order, which was accompanied by the notation “Opinion to follow.”

Today, the Court is issuing that opinion (PDF). (( You may be wondering, “When does the clock start for rehearing? Do you have to file a motion for rehearing before you know the Court’s reasoning?” According to Rule 64.1, the clock starts “when the Court renders judgment,” so that would be March 28th. The docket shows that the real party in interest filed a motion to extend time within the time permitted, and the Court had granted that motion before issuing this opinion. ))

This case grows out of a judicial election in Webb County. One of the candidates for a district court seat, Fernando Sanchez, objected to the eligibility of his opponent, Rebecca Ramirez Palomo, arguing that she had not (as required) been a practicing lawyer for the four years preceding the November 2012 election date. Sanchez noted that Palomo had briefly claimed an exemption from mandatory continuing legal education (MCLE) requirements. The local county party chair refused to remove Palomo from the ballot.

Sanchez sought a writ of mandamus in the court of appeals. The court of appeals granted that relief, ordering the party official to remove Palomo’s name from the ballot. The heart of the court of appeals’s reasoning was that Palomo was ineligible to practice until the time that she actually notified the state bar that she intended to reassume her MCLE responsibilities. Because that notice was sent within the four-year window, the court concluded that the public records conclusively established that she was not eligible.

The Texas Supreme Court disagreed about whether this notice to the bar should be given dispositive weight. The Court explained that attorneys report their MCLE status only at the end of the relevant year. Before that time, they can change their mind about whether or not they intend to do the hours: “A lawyer might claim the non-practicing exemption early in the compliance year, fully intending not to practice, yet change her mind before the compliance deadline, withdraw the claim, and complete all MCLE requirements for the year. Or a lawyer can wait until the compliance deadline — or perhaps even later — to claim an exemption from MCLE for the preceding year. All that matters is whether the lawyer is entitled to an exemption from MCLE requirements by the deadline for completion.”

Thus, unlike other types of “inactive” status, an attorney does not need to formally notify the bar in advance to resume active status after an MCLE exemption. For that reason, the Court held, the date on Palomo’s letter to the bar does not control this question.

Instead, the Court reviewed the other public records and concluded that they did not meet the heavy burden of “conclusively” showing that Palomo was ineligible during the four years preceding the general election in November 2012. The Court explained that Palomo probably did not intend to claim an exemption for the year ending October 2009 at all (“a year in which she actually met her MCLE requirements”) but instead for the previous year ending October 2008, which would not affect her eligibility for this election. (( Palomo’s birthdate falls in November, so her compliance year ends on October 31. ))

On Tuesday afternoon, I heard an NPR story about a legal battle in Virginia that reminded me of some cases that will be heard by the Texas Supreme Court this fall.

The Texas cases are Masterson v. Dicocese of Northwest Texas, No. 11-0332, and The Episcopal Diocese of Fort Worth v. The Episcopal Church, No. 11-0265 (direct appeal). Both involve questions about how to divide property when a local diocese splits from a national church organization — and how the First Amendment might limit the ability of Texas courts to speak to these questions.

The Virginia lawsuit actually ended about two years ago with The Protestant Episcopal Church v. Truro Church, 694 S.E.2d 555 (Va. 2010). The court there sided with the umbrella entity (the “hierarchical church”), concluding as a matter of Virginia statutory law that the requirements to show a property division had not been established. For that reason, the Virginia court did not reach the federal constitutional question.

The NPR story isn’t strictly a legal story — there’s no discussion of the merits of the suit. The focus is on how the Virginia lawsuit has affected congregations on both sides of the suit as they now try to disentangle their property and move forward.

Source: “A Church Divided: Ruling Ends Va.’s Episcopal Battle”