All the action on this week’s orders list involved motions for rehearing.

The Court granted rehearing of two cases that it had previously declined to review, restoring them to its docket (but not yet granting review or scheduling argument). It also denied rehearing in a high-profile case about limits on the exercise of eminent domain power by private pipelines.

Private pipelines: Eminent domain cannot be used for purely private use

Texas Rice Land Partners Ltd., et al. v. Denbury Green Pipeline-Texas LLC, No. 09-0901 (op. on reh’g) (PDF)

The Court denied rehearing in this case, leaving intact its earlier judgment that a private pipeline had failed to prove its authority to condemn property under provisions of Texas law that lend the State’s eminent-domain authority to certain common carriers. The segment of pipeline at issue was to be used by Denbury Green to transport its own CO₂. The Court adhered to its earlier holding that a permit from the Railroad Commission authorizing the pipeline (after what the opinion calls “checking boxes on a one-page form”) was not conclusive proof of public use.

A new opinion issued on rehearing. Along with some technical changes to the text, its expanded conclusion is (perhaps) a response to critics of the original opinion:

Pipeline development is indisputably important given our State’s fast-growing energy needs, but economic dynamism — and more fundamentally, freedom itself — also demand strong protections for individual property rights. [John] Locke deemed the preservation of property rights “[t]he great and chief end” of government, a view this Court echoed almost 300 years later, calling it “one of the most important purposes of government.” Indeed, our Constitution and laws enshrine landownership as a keystone right, rather than one “relegated to the status of a poor relation.”

A private enterprise cannot acquire unchallengeable condemnation power under Section 111.002(6) merely by checking boxes on a one-page form and self-declaring its common-carrier status. Merely holding oneself out is insufficient under Texas law to thwart judicial review. While neighboring states impose fewer restrictions on the level of public use required for such takings, meaning companies may seize land to build pipelines for their exclusive use, the Texas Legislature enacted a regime more protective of landowners.

The opinion then provides a little guidance to pipeline companies who are trying to invoke the eminent-domain power — have a customer besides yourself:

If a landowner challenges an entity’s common- carrier designation, the company must present reasonable proof of a future customer, thus demonstrating that the pipeline will indeed transport “to or for the public for hire” and is not “limited in [its] use to the wells, stations, plants, and refineries of the owner.”

That phrase “future customer” does not appear in the original opinion. This seems to be the biggest substantive change. The old opinion suggested that the key moment was the time of the permit:

to qualify as a common carrier of CO₂ under Chapter 111, a reasonable probability must exist, at or before the time common-carrier status is challenged, that the pipeline will serve the public (p.13).

The new opinion makes more clear how pipelines can comply with the rule, by having evidence of a future market for its use:

to qualify as a common carrier under Section 111.002(6), a reasonable probability must exist that the pipeline will at some point after construction serve the public (p.14)

The opinion from August is still online here. The Court’s public information officer also emailed out an overview of the changes.

Petitions in which rehearing was granted

Grants of rehearing are rare, so it’s notable that the Court issued two today. Neither of these cases has (yet) been selected for oral argument.

• Commission for Lawyer Discipline v. Schaefer, No. 10-0609. The orders list notes that a motion for sanctions has been denied.

• Lee C. Ritchie, et al. v. Ann Caldwell Rupe, No. 11-0447. This case involves shareholder oppression in a closely-held corporation, which seems to be the specialty of the Dallas Court these days. The petition had (originally) been denied without a response being requested. The grant of rehearing now restores the case to the Court’s docket. The Court has not yet granted review (or even requested merits briefing, which seems likely given the grant of rehearing). (( The Court has sometimes requested a petition response, or even full merits briefing, with the rehearing still pending. )) You can read the Petition or the Response to Motion for Rehearing.

With today’s orders list, the Texas Supreme Court issued one long-awaited decision about water rights in Texas. It did not grant any other cases for review.

Edwards Aquifer Authority v. Burrell Day and Joel McDaniel, No.  08-0964 (Hecht, J.).

This was one of the longest-pending cases on the Court’s docket and attracted two dozen amicus filings. It led to a 49-page slip opinion running through complicated administrative and constitutional questions. But the opinion’s opening sums up the new legal holding in two sentences:

We decide in this case whether land ownership includes an interest in groundwater in place that cannot be taken for public use without adequate compensation guaranteed by article I, section 17(a) of the Texas Constitution. We hold that it does.

That sounds simple enough. Texas recognizes a property interest of each landowner in any “groundwater in place” beneath their property.

The district court below had ruled for the aquifer authority, holding that there could be no taking as a matter of law. The court of appeals reversed that summary judgment and ordered a remand for further proceedings. Today, the Supreme Court affirmed the court of appeals’s disposition. These plaintiffs will be allowed to proceed on their takings claim.

Much of the opinion tries to place this rule in context, and in so doing, will set the framework for future water-rights litigation (and legislation) in Texas. [Read more →]

If you rationalize your time watching ESPN as a way to supplement your legal news — and believe me, I’ve been there — you will be most interested to know that today the Texas Supreme Court denied review in Mike Leach v. Texas Tech University, No. 11-0164.

In other news, with today’s orders list the Texas Supreme Court issued an opinion today that could be very important to litigants trying to overturn default judgments, granted review in two others for future oral argument, and also granted rehearing (without yet issuing new opinions) in what had been a deeply divided workers compensation case.

Default judgments: Once a party proves an actual lack of notice, they need not establish their diligence in checking the status of a pending case

Mabon Limited v. Afri-Carib Enterprises, Inc., No. 09-0715 (PDF)

In this case, a party that had been subjected to a default judgment brought a “bill of review” to challenge the validity of that prior judgment. Mabon had defaulted by not appearing when noticed. The wrinkle in the case is that Mabon did have an attorney during that prior case, but that attorney had “[u]nbeknownst” to them, been suspended from the practice of law during this time. Once Mabon learned of the default judgment, it hired a new attorney to bring this challenge.

Ultimately, the court of appeals held that Mabon would have to prove that — even if it had lacked notice — it was also diligent in monitoring the case. The court of appeals ordered a remand for Mabon to present evidence. Mabon filed a petition for review, as did Afri-Carib (arguing that the second chance of a remand was inappropriate).

The Texas Supreme Court denied the petitions, but ultimately was persuaded to grant rehearing. This was, as it turns out, the motion for rehearing written in screenplay format.

Today, the Court sided with Mabon, holding that there was no independent requirement to show diligence once a represented party shows an actual lack of notice of the trial setting or default judgment.

Rehearing Granted

The Court granted rehearing in Texas Mutual Insurance Co. v. Ruttiger, No. 08-0751, in which the Court had deeply divided about how the workers-compensation statute preempts other legal duties on how insurers should behave, such as the duty of good faith and fair dealing. The case has now been returned to the Court’s active docket. (The previous opinions have not yet been withdrawn.)

New Grants: Argument dates TBA

• FPL Energy, LLC, et al. v. TXU Portfolio Management Co., et al., No. 11-0050. This could be an important case about liquidated damages, both in the energy context and more generally under Article 2 of the UCC.

• Felton v. Lovett, No. 11-0252. This was a suit for malpractice against a chiropractor. The petition challenges, in part, whether a chiropractor is a “physician” qualified to opine on causation under the Texas Medical Liability Act.

With today’s orders list, the Texas Supreme Court turned away the second recent challenge to the Texas franchise tax.

In November, the Court upheld the tax against a challenge brought under an unusual statute that vests the Court with original jurisdiction to hear certain cases in the first instance, entirely bypassing the trial court. In re Allcat Claims Service, L.P., No. 11-0589 (blog post). In today’s opinion, the Court refers to the provision authorizing these suits as “section 24.”

Just before Allcat oral argument, Nestle USA also filed a challenge to the franchise tax (blog post), with at least some issues that overlapped with Allcat.

Today, the Texas Supreme Court dismissed Nestle’s section 24 case for want of jurisdiction. Nestle USA, Inc. v. Susan Combs, No. 11-0855. Justice Hecht wrote a ten-page opinion for the Court (PDF).

In Allcat, the Court struggled to reconcile the relief the parties were seeking through section 24 (an injunction) with the background constitutional limits on the Court’s power to hear direct cases (which must be mandamus proceedings). Today, the Court struggled with how to reconcile section 24 with a competing statute — the requirement in the Texas Tax Code that a party who wants to challenge a franchise-tax assessment must begin by paying the challenged tax under protest. If a party does not comply, they cannot bring suit in district court. The question is: Does the same restriction apply to section 24 suits that bypass the district court?

The Court held that, yes, this lawsuit was barred because the taxpayers had not complied with this provision of the Tax Code. The Court explained its reasoning in terms of sovereign immunity: A suit to compel a tax refund requires a waiver of immunity, and because the taxpayers did not comply with the statutory directive to file their taxes under protest, immunity was not waived.

Although the Nestle case does not reach the merits of the parties’ claims, its procedural holding will likely make these section 24 suits less attractive alternatives to district court proceedings. For taxpayers seeking a refund, the district court is a much easier forum. For taxpayers seeking constitutional guidance, the normal appellate process may be a smoother path, without the quirky, limited jurisdiction afforded by section 24.

With its orders list today, the Texas Supreme Court did not choose any new cases for argument or issue opinions. But it did reshuffle its argument calendar a bit.

All three of these were chosen for argument with last week’s orders (blog post):

• The Court chose an argument date for In re Stephanie Lee, No. 11-0732: February 28, 2012.

• It granted a motion to “reset” the argument in Combs v. Roark Amusement and Vending, L.P., No. 11-0261 (the case about arcade claw machines). It had been scheduled for February 28, 2012. No new date has been assigned.

• And — for the second in the past two months — it denied a party’s request to reschedule oral argument. Without comment, the orders list notes that a request was filed in In re the Office of the Attorney General, No. 11-0255. It remains set for oral argument on February 27, 2012. (A similar request was denied on December 22, 2011 in Ashford Partners, Ltd. v. Eco Resources, Inc., No. 10-0615. On that orders list, Justice Guzman noted her dissent to the denial of the motion.)

In at least one regard, U.S. Supreme Court advocates have it easy. They know about the grant of review before the merits briefs are even filed, so they can block out preparation time — many go to the elaborate ends of participating in outside moot courts.

In the Texas Supreme Court, by contrast, there can be just a few weeks between the grant of review and the oral argument date. The lawyers in the four cases mentioned above were originally given about four weeks notice of the argument date.

With two of these motions being denied in recent months, I’m curious to know what reasons for rescheduling the Court is finding persuasive — and unpersuasive.

With today’s orders list (earlier post), the Court also chose six cases for oral argument.

February 27, 2012

• Wendell Reeder v. Wood County Energy, LLC; Wood County Oil & Gas, Ltd.; Nelson Operating, Inc.; Dekrfour, Inc.; Bobby Noble; Exzena Oil Corporation; David Fry And Patricia Fry, No. 10-0887. A case about the standard of care required of oilfield operators in relation to the mineral-rights holders.

• Enbridge Pipelines (East Texas) L.P. v. Avinger Timber, LLC, No. 10-0950. A takings case about how the value of the property is measured. How do courts distinguish value that was already present in the property before the taking was announced versus any value added by the added to the property from the project itself?

• In re the Office of the Attorney General, No. 11-0255. In this child support case, the question is whether the contempt remedy is still available when the parent makes payment after an enforcement hearing is noticed but before it is held. The State argues that the statute favors an ongoing punishment for those who did not pay timely before notice rather than the notice offering an additional incentive to submit payment before the hearing.

February 28, 2012

• Susan Combs, Comptroller of Public Accounts of The State of Texas, and Greg Abbott, Attorney General of the State of Texas v. Roark Amusement and Vending, L.P., No. 11-0261. If you’ve been waiting for a case about those coin-operated machines where you try to maneuver a crane arm to grab a small plush toy, this really is your lucky day. Just don’t get too excited: it’s a tax case about whether the owner of a machine gets a refund on the sales tax they paid on the plush toys.

• City Of North Richland Hills, Texas v. Laura Friend, Individually and as personal representative of the estate Of Sarah Friend, deceased and Luther Friend, individually, No. 11-0367. A case about the scope of the Tort Claims Act. Does it immunize government the against a claim that a defibrillator was not provided at a city water park?

Date to be determined

• In re Stephanie Lee, No. 11-0732. The case asks about what discretion a trial court has to refuse to enter a mediated settlement agreement in a family-law case. (earlier post) The Court issued a stay, granting temporary relief. An oral argument date has not been announced.

The Texas Supreme Court issued several opinions with today’s orders list. The Court also chose six cases for future oral arguments, including the family-law case I wrote about yesterday. I’m breaking those grants into a separate post.

Opinions

Do the findings of a city nuisance panel foreclose a takings claim in court? No, but the suit must be brought promptly.

Today the Court denied rehearing in City of Dallas v. Stewart, No. 09-0257, in which it had held that a citizen whose property was taken by a city administrative body should be able to challenge that finding in court.

A number of cities and government groups had filed amicus briefs, arguing that the new rule was unworkable. Justice Guzman noted many of those critics in her opinion today dissenting from the denial of rehearing (opinion).

Chief Justice Jefferson also reworked his five-vote majority opinion, adding a new section to respond to those critics. He noted how rare it is for property owners to file these suits for judicial review, both because of the short time window available and because the property owner bears the risk of paying the city’s legal costs if it loses.

In a related case, the Court today resolved Patel v. Everman, No. 09-0506 by per curiam opinion. In that case, the property owner had filed a suit for judicial review — but then non-suited it. Later, he filed a separate suit to challenge the taking. The Court rejected this as an attempt to circumvent the time limits: “Patel cannot attack collaterally what he declined to challenge directly.”

Workers Comp coverage extends to temporary workers, even if neither the employer nor the insurance carrier intend it to do so

Port Elevator-Brownsville, L.L.C. v. Rogelio Casados and Rafaela Casados, No. 10-0523 (Guzman, J.)

Casados was a temporary worker who was killed on the job. Port Elevator (the company that had hired him through the temp agency) did have workers compensation coverage, although it had not separately paid to cover its temporary workers. Its workers comp carrier (Texas Mutual) also denied coverage to Casados.

When Casados filed a lawsuit, Port Elevator invoked the workers-comp bar as a defense. Today’s opinion for a unanimous Texas Supreme Court holds that his lawsuit was barred by the Texas Workers Compensation statute because Port Elevator had obtained coverage for at least part of its workforce.

The key to the Court’s reasoning was its conclusion that Texas law did not permit an employer to “split” its workforce with regard to workers comp. Either all the workers are covered, or none are covered. For this reason, the Court concluded that it did not matter if Texas Mutual had actually charged or collected a premium for temporary workers — they were covered the same as full employees.

Here, Casados offered several reasons why the Court should, in its words, “adopt an additional, intent-based exception to the rule against splitting workforces.” That framing sounds a little ominous. Really, the Court is asking if the statute restricts the freedom of contract by carriers and employers to choose a narrower range of coverage. The Court’s holding is, yes, it does. Whether the parties wanted narrower coverage is irrelevant; the statute makes coverage all or nothing.

In this case, that’s very bad for Casados — perhaps doubly so because his workers comp claim has already been denied. In the longer term, this holding may cut both ways for employers. A bar to suit is nice, but firms that employ a significant number of temporary workers may see higher premiums to compensate.

How does supersedeas apply to the decisions of state licensing bodies?

In re Carl Bass, Patricia Grutzmacher, and Thomas Bauer, No. 11-0245

We don’t know the answer to that question just yet. But the Texas Supreme Court is showing some interest in it, today ordering that a trial court provide more detail about its reasoning.

A state board suspended the license of three accountants. They sued to invalidate those suspensions under the Open Meetings Act. The district court agreed with them on the merits of that claim — but allowed the state to supersede that judgment pending appeal without posting any sort of security (which had the practical effect of reinstating the suspensions).

The accountants argued that Texas Rule of Appellate Procedure 24.2(a)(3) should give the trial court discretion to deny supersedeas, even when a state agency is involved that normally does not have to post a bond. The district court and court of appeals rejected that argument.

With today’s order, the Texas Supreme Court paused its own proceedings to ask the trial court to formally state its conclusions of law and findings of fact.

The State is urging an absolute rule that it can supersede all judgments, regardless of trial court discretion.

The order by the Texas Supreme Court asks the trial court to state whether that is the principle on which it ruled for the State, or whether it did so under its general discretion over supersedeas. If the former, then the case presents a pure question of law. If the latter, then t is a much more challenging mandamus.

The Court did not issue any opinions with today’s orders list, but it granted rehearing in a case about how the statute of frauds applies to purchases by a trust or partnership.

John Ganim v. J. Farouk (Frank) Alattar, No. 10-0592.

Two business partners discussed entering a real-estate transaction together to buy some property, and one of them signed for it as “Trustee” (of an unidentified trust). The two later had a falling out, disagreeing about whether the land was bought for them collectively or just by one of them.

In June, the Texas Supreme Court held that the statute of frauds did not bar enforcement of the parties’ oral agreement about this real estate purchase (opinion).

Rehearing was sought, and an amicus brief was submitted by former Justice Brister on behalf of the Episcopal Diocese of Fort Worth — which had its direct appeal about the ownership of church property accepted by the Court two weeks ago.

The amicus brief suggests that the diocese is concerned about how a broad reading of Ganim v. Alattar might affect its pending direct appeal:

… the opinion’s suggestion that a claimant to property can plead around the statute of frauds and the Texas Trust Code by asserting nothing but an oral agreement for joint acquisition of land. Can a third party — who has no title, no signed writing, and no money at risk — become owner of real estate simply by convincing a jury that an oral promise of joint ownership was made many years ago? If that is Texas law, then claimants from Rome, Canterbury, or anywhere else might ask a jury to award interests in Texas church properties based on nothing but oral testimony about “understandings” from long ago.

The Court’s grant of rehearing in Ganim gives it a little more time to sort through the broader implications.

The amicus strategy here is also instructive. Although many groups have some interest in how this rule applies to partnerships or trusts, this amicus brief had the secondary (or perhaps primary?) goal of highlighting the importance of the diocese’s pending direct appeal. Nicely done.