With today’s orders list, the Texas Supreme Court decided three pending case, granted two new cases for argument this fall, and revised its opinion in a major oil & gas case.

The new cases chosen for argument this fall are on a familiar topic: What conduct by a hospital or doctor falls within the special procedural rules adopted in 2003 for health-care liability claims? The two fact patterns — a sexual assault and a hospital technician beating a psychiatric patient to death — could push the boundaries of the test.

Three decisions today

• Notice requirements in med-mal cases: Jose Carreras, M.D. v. Carlos Francisco Marroquin, et al., No. 09-0857 (Wainwright, J.) (DDB). The Court held that, in order to meet the notice requirement of the medical-malpractice statute, a potential plaintiff must send not only a simple notice but also the form authorizing release of the patient’s information.

• Who can sue over broken commercial lending agreements: Basic Capital Management, Inc., American Realty Trust, Inc., Transcontinental Realty Investors, Inc., Continental Poydras Corp., Continental Common, Inc., and Continental Baronne, Inc. v. Dynex Commercial, Inc. and Dynex Capital, Inc., No. 08-0244 (Hecht, J.) (DDB). The context here was commercial real-estate development loans. Basic Capital, through two investment companies it managed, set out to develop three properties — each owned, in turn, by a “SABRE” (a separately owned, bankruptcy-remote entity). One purpose of a SABRE was to make collection easier on the lender, if the loan should fail; having the assets in a single entity with no other significant debt would help ensure that the lender on that project did not have to split the asset with other creditors.

  Here, however, the projects did not get that far. When the lending environment changed, Dynex walked away from its agreement. Basic Capital then sued, arguing that it had suffered financial injury by Dynex’s refusal to fund the loan commitments.

  Dynex argued, in turn, that Basic Capital and its subsidiaries lacked standing to enforce its agreements with the SABREs. The Court held that — at least in the context of this type of arrangement — a corporate owner could was a third-party beneficiary who could sue:

  We certainly agree that as a general proposition, a corporate parent is not a third-party beneficiary of its subsidiary’s contract merely by virtue of their relationship. But here the benefit to each SABRE not only inured to its parent, the transaction was so structured to benefit Dynex. SABRE-borrowers provided a mechanism for ART and TCI to hold investment property directly but in a way that would provide Dynex greater security. If Dynex and Basic did not intend the Commitment to benefit ART and TCI directly, then the Commitment had no purpose whatever.

  That’s a long way of saying that you shouldn’t expect the Court to extend the third-party-beneficiary doctrine in your case, unless you can show some business benefit to the other side.

  The Court also held that this kind of financial injury was a foreseeable result of breaching the contract and, thus, Basic Capital could pursue consequential damages.

• Burden of proof in arbitration enforcement: Veronica Ellis and Pacesetter Builders, Inc. d/b/a Coldwell Banker Pacesetter Steel Realtors v. Dr. Ron and Tana Schlimmer, No. 10-0243 (per curiam)(DDB). This is yet another case about the very different procedural landscape facing parties who have an agreement under the Texas Arbitration Act versus the Federal Arbitration Act. (( Under the TAA, a party can file an interlocutory appeal if the trial court does not compel arbitration. But that statute does not permit the same appeal for arbitration agreements under the FAA. So litigants often end up fighting over whether the court of appeals has jurisdiction to hear the appeal at all. ))

  This case presented a wrinkle — how do you decide if the TAA or FAA applies when the agreement did not say and the record below was not well developed?

  The court of appeals focused on the general rule that the appellant has the burden, if questioned, to prove the court’s jurisdiction over the appeal. Because the broker had not proven that the FAA did not apply, the court of appeals was not convinced it had jurisdiction. So it dismissed.

  The Texas Supreme Court focused on a different presumption — the rule that, once a contract with an arbitration clause has been introduced, the burden falls on the party opposing arbitration to show any defenses. The Court characterized the FAA argument as a defense to the enforceability of the agreement, explaining that the FAA would preempt the TAA. (( I don’t know of an argument in this case why the FAA would have preempted the enforceability of the agreement itself. )) Because the home buyer had not shown that defense was applicable, the Court held, the court of appeals should have retained jurisdiction over the case.

New petitions granted (argument dates TBA)

The theme is: Does the medical-malpractice statute apply to intentional assaults by hospital staff?

• Matthew W. Wasserman, M.D. v. Christina Bergeron Gugel, No. 10-0513 (DDB). The question is whether “health care liability claims” include allegations of assault or sexual assault by health-care providers.

• Texas West Oaks Hospital, LP and Texas Hospital Holdings, LLC v. Frederick Williams, No. 10-0603 (DDB). In the psychiatric context, does a “health care liability claim” include a fight between a psychiatric technician and a psychiatric patient, when the technician kept hitting the patient after he was down & the patient died of the injuries.

Revised opinion in the Exxon well-plugging case

The orders list mentions a revised opinion in the Exxon well-plugging case. Exxon Corporation and Exxon Texas, Inc. v. Emerald Oil & Gas Company, L.C. and Laurie T. Miesch, et al., No. 05-1076 (DDB). The old opinion is here. The new opinion is here; the changes were very minor. (( According to Osler’s email, the changes were:
– Wording in the first paragraph, page 1, noting the substituted opinion and modified judgment.
– Tense change in first paragraph, page 13.
– Insert “the” before date in continuing paragraph, page 21.
– Tense changes in footnote 20, page 31.
– “Different from” changed from different than and two citations omitted in case cites in last paragraph, page 41.
– “The” inserted before sale and Company inserted to make Pace Oil & Gas Company in first sentence in first full paragraph and wording changed in later sentences in same paragraph, page 42.
– “Further proceedings” substituted at the end of concluding paragraph, page 44. )) The judgment did not change.

It was a very short orders list this week. The Texas Supreme Court did not issue any opinions or choose any new cases for review.

The Justices will meet for an internal conference next Monday and Tuesday.

With today’s orders list, the Texas Supreme Court issued two decisions and granted review in one new cases.

Cities do not have sovereign immunity against suits for “unilateral contract” based on a city ordinance

The case is The City of Houston v. Steve Williams, et al., No. 09-0770 (DDB), brought by a group of firefighters alleging they were not paid the full amount of promised benefits. I will be writing a little more about this in a separate post.

Electric deregulation… with an interesting statutory construction holding about “impossible” conditions.

State of Texas, et al. v. Public Utility Commission of Texas, et al., No. 08-0421 (Willett, J.) (DDB).

This is an electric-deregulation appeal. Normally it’s the bloggers who would say that it was “complex” or posed “vexing questions.” But that’s how the first paragraph of the opinion sets things up.

Most of the substance here is very specific to the process of electric deregulation in Texas in the early 2000s. The rates in question were charged in 2002 and 2003 — these regulatory appeals can take their time to bubble up through the system.

But there is statutory-construction holding that might get attention outside of this regulatory framework.

Section 39.153(a) of the Texas Utilities Code set up “Capacity Auctions” for the utilities to sell portions of their existing generation capacity to others — and it required them to sell “at least 15 percent of the electric utility’s Texas jurisdictional installed generation capacity.” Other portions of the statute gave rule-making power to the Public Utility Commission (PUC). The PUC, in turn, issued rules that required Genco, the utility here, to sell that generation capacity “in four product categories: baseload, gas-intermediate, gas-cyclic, and gas-peaking.” If a utility met the requirement, it could receive a higher level of compensation for the deregulation; if it did not meet this requirement, then its recovery would be far lower.

Genco met that requirement — except that it could not sell enough “gas-intermediate” in 2003, even after requesting modifications in the procedures from the PUC.

As a result, the PUC concluded that Genco could not receive the full compensation. The PUC thus reduced Genco’s “true-up amount” by $439.7 million.

The Texas Supreme Court disagreed, refusing the interpret the statute’s 15% language as an absolute requirement because it was just too hard to meet:

the record indicates that Genco made a good faith effort to comply with this statute and was simply unable to sell by auction, at any price, the amount of one product category required by PUC rules. It points out that no utility was able to sell all its gas-intermediate entitlements for even one month in 2003. We avoid statutory constructions that impose an impossible condition.

The Court concluded that the Legislature’s dual goals here — of creating a competitive market while compensating the utilities fairly — would be thwarted if a roughly $5000 shortfall in one auction led to a reduction of more than $400 million in the true-up amount.

The Court reversed and remanded the case to the PUC to redo its calculation in light of this opinion.

New petition granted (on rehearing)

The Court granted a new petition off of its rehearing docket, with oral argument to be scheduled at a later time.

Venkateswarlu Thota, M.D. and North Texas Cardiology Center v. Margaret Young, et al., No. 09‑0079 (DDB). Several issues are presented, but the key seems to be a challenge to whether the plaintiff had preserved error on his challenge to the jury charge. The question is whether the charge included both valid and invalid theories — what Texas appellate lawyers will recognize as a Casteel problem. The petitioner argues that the plaintiff’s objections at the charge conference (a “plain vanilla no-evidence objection”) did not sufficiently preserve error on the point presented on appeal.

With today’s orders list, the Texas Supreme Court granted rehearing in the Texas Open Beaches Act case Severance v. Patterson. (You can read more about it and see links to previous coverage, on this blog and other news sources, through DocketDB.) The Court has also set the case for re-argument, which has not been common in recent rehearing grants. The argument will be April 19, 2011.

One new grant

The petition for review in Safeshred, Inc. v. Martinez has been granted. You can read more in this post from earlier today.

Five other decisions

• I started to summarize the Court’s decision in Texas Railroad Commission v. Texas Citizens for a Safe Future and Clean Water, and ended up writing this separate post.

• It was an abuse of discretion for a trial court to refuse to let a defendant’s counsel voir dire potential jurors about their views of homosexuality in a civil-commitment case about an alleged sexual predator. At trial, the State’s expert testified that, “if somebody has heterosexual preferences and then they later begin practicing homosexual acts, it infers that there is an instability within their personality which again, is more evidence of why I diagnosed [Hill] with a personality disorder.” The Court, speaking per curiam, reversed and remanded for a new trial. In re Hill, No. 10-0280 (per curiam) (DDB).

• A business entity that owns property can offer non-expert testimony as to its value, so long as the person testifying is an appropriate corporate officer and has personal knowledge of the value. But this testimony failed the test. Reid Road Municipal Utility District No. 2 v. Speedy Stop Food Stores, Ltd., No. 09-0396 (DDB). Justice Johnson wrote for the Court that this witness, who worked for a different corporate entity that managed this investment, was not in the narrow class of witnesses who could give testimony for the limited partnership itself. Justices Willett and Lehrmann concurred, explaining that they would have announced a more permissive rule for limited partnerships to recognize that they often do not have formal corporate officers of their own but typically act through managing partners. (Justice Guzman did not sit on this case.)

• An arbitration agreement can grant a non-signatory the right to compel arbitration against those who did sign it. In re Joseph Charles Rubiola, et al., No. 09-0309 (Medina, J.) DDB.

• And in a case about extensions of time for medical-malpractice expert reports, the Court reversed to give the court of appeals a first chance to consider how these facts fit with Samlowski v. Wooten, which the Court decided two weeks ago. Chiquita Mitchell, et al. v. The Methodist Hospital, et al., No. 10-0117 (per curiam) DDB.

With today’s orders list, the Texas Supreme Court issued one opinion and did not select any new cases for review.

Compensation for wrongful imprisonment when the wrongful conviction also triggers parole revocation

In re Billy James Smith, No. 10-0048 (DDB)

In this case, the Texas Supreme Court confronted the question whether a wrongfully convicted prisoner could recover for time he spent in prison due to the revocation of a previous parole — caused by that wrongful conviction.

Smith was convicted of armed robbery in 1970, eventually being released on parole in 1983. In 1986, he was convicted to aggravated sexual assault — the conviction later determined to be wrongful. This conviction led to the revocation of his previous parole, and for a brief time he was jailed for both reasons. Then, in 1987, his parole came to an end and he was imprisoned only for his later conviction.

In 2006, it was determined through DNA evidence that he was actually innocent of this second conviction. He applied for compensation under the Texas statute. The Comptroller paid most of the claim, but withheld payment for the period of time when he was imprisoned for the parole revocation.

The dispute is over this provision of the statute, which carves out an exception for time periods when “the person was also serving a concurrent sentence for another crime.” Tex. Civ. Prac. & Rem. Code §103.001(b).

The Texas Supreme Court, after hearing oral argument, determined that this provision was ambiguous about whether “serving … a sentence” included parole. It thus looked to other sources beyond the statutory text for guidance.

The key outside source became a 2007 opinion from the Texas Attorney General that dealt with a similar situation arising from the Tulia prosecutions. In that case, one of the applicants had been released on probation (rather than parole, as in this case). The Attorney General eventually determined that the Comptroller should approve the application “if the concurrent sentence was served solely because of the wrongful conviction.”

In defending the Comptroller’s decision not to pay this claim, the AG took the position that parole was different than probation. The Texas Supreme Court acknowledged that the two were different, but concluded that the differences did not bear on the Legislature’s intent in this statute: “it seems unlikely that the Legislature intended to compensate wrongfully-imprisoned probationers, and not parolees, given the similarity in their circumstances.”

The Texas Supreme Court granted relief, conditionally ordering the Comptroller to pay the remainder of the claim.

In this week’s orders list, the Texas Supreme Court decided four cases and chose three new ones for oral argument at a future date.

This week’s decisions

Lots today about medical-malpractice expert reports:

• Eberhard Samlowski, M.D. v. Carol Wooten, No. 08-0667 (DDB). The key question was when a trial court can extend a party’s time to file an expert report in a medical-malpractice case. The Court divided 3 (opinion of the Court) to 2.5 (with one concurring in judgment only) to 1 (partial concurrence, partial dissent) to 3 (full dissent). For names and faces, see the case’s DocketDB page. In the end, the Court modified the court of appeals’ judgment to remand to the trial court for further proceedings in light of these opinions.

  Justice Medina, writing for two other Justices, would link the trial court’s discretion to the question whether a cure was feasible. With that in mind, he would permit a plaintiff whose claim was dismissed to file a motion to reconsider within 30 days, attaching a report that fixed the problem.

  Justice Guzman concurred but would instead have held that this record already established that denying an extension was an abuse of discretion. (( This portion of the opinion was joined by Justice Lehrmann but not by Justice Wainwright. ))

  The dissent, through Justice Johnson, agreed Justice Medina that whether the report could be cured was the right question to ask. But the dissent thought it would be procedurally improper to look at attempted cures filed after the dismissal. In the dissent’s view, the abuse of discretion must be measured based on the record assembled the moment of dismissal, not after.

  Because six Justices agreed that a remand was the most appropriate remedy, that is the modified judgment announced by the Court.

• Debbie Stockton v. Howard A. Offenbach, M.D., No. 09-0446 (DDB). The Court, through an opinion by Justice Medina, held that the 120-day time limit on serving an expert report in a medical-malpractice case was not tolled when the doctor had lost his license, “probably left the state,” and his “whereabouts are unknown.” The insurer hired an attorney to appear on the doctor’s behalf and argue that the suit was time-barred. The court of appeals held that tolling was appropriate under this circumstance.

  The opinion explained that the statute did not permit tolling: “The application of the statute in this case, however, is unfortunate and, in part, a consequence of the Legislature’s decision to calculate the 120-day expert report deadline from the date of filing the suit rather than its service on the defendant. The statute appears to assume that serving a physician or other health care provider will be simple and straightforward. That, however, is not always the case, and when complications arise, as here, section 74.351(a) presents a very small window through which to serve both the lawsuit and the expert report.”

• Turtle Healthcare Group, L.L.C. d/b/a Fred’s Pharmacy v. Yolanda Higuera Linan, et al., No. 09-0613 (per curiam) (DDB). In another case about the scope of the Texas medical-malpractice statute, the question was whether claims involving a failed ventilator — such as not charging the batteries and failure to send it for proper maintenance — were health-care liability claims. The Court held that they were covered and, accordingly, that the plaintiff had failed to file the required expert report.

• The Burlington Northern and Santa Fe Railway Co. v. National Union Fire Insurance Co., No. 10-0064 (per curiam) (DDB). The Court held that the court of appeals had made a mistake in looking only at the pleadings and insurance policy to conclude that the insurer did not have a duty to pay the claim. Although that “eight corners” analysis is appropriate for questions about whether an insurer has a duty to pay to defend the lawsuit, it does not apply to question about the duty to indemnify by ultimately paying the claim, which normally turns on facts elicited during the litigation.

New petitions granted

Three petitions were chosen for oral argument:

• The Finance Commission of Texas, et al. v. Valerie Norwood, et al., No. 10-0121 (DDB). The Texas Constitution used to forbid home-equity lending in Texas. After a recent amendment, it now imposes special restrictions on it. The Finance Commission issued rules interpreting those provisions. Last year, the Austin Court upheld some but not all of the Commission’s rules about home-equity lending. No one was entirely happy — the Commission, the Texas Bankers Association, and some of the individuals who challenged the rules all filed petitions for review. (( This challenge was litigated below with ACORN as the lead plaintiff, but today’s orders correct that: “unopposed motion for dismissal of ACORN as a party due to dissolution and correction of style of the case, granted” ))

• Prairie View A&M University v. Diljit K. Chatha, No. 10-353 (DDB). There is a 180-day statute of limitations for a government employee’s complaint about discriminatory pay. The question presented is whether that runs from from the date of the paycheck embodying that decision or the (earlier) date on which the employee was told about the decision.

• El Apple I, Ltd. v. Myriam Olivas, No. 10-0490 (DDB). In another employment-discrimination case, the question is about calculating attorneys fees. The petition argues that a detailed lodestar method should be applied, with breakdowns for each specific task. It also argues that appellate fees are not appropriate to be awarded prospectively but should instead be calculated on remand.

That last issue about appellate attorneys fees should be of particular interest to readers. Although the context is narrow, the Court’s guidance may spill over to other statutes under which Texas awards attorneys fees.

There were no opinions or grants with today’s orders list.

The Court is closed next Monday and has a private conference of the Justices on Tuesday.

With today’s regular orders list, the Court granted rehearing in a petition for review. It also rescheduled oral argument, at the parties’ request, in one of the cases that had been chosen for argument in March. (( The rescheduled case is Texas Rice Partners v. Denbury Green Pipeline-Texas LLC, No. 09-0901 (DDB). The new argument date will be April 19, 2011. ))

Fraudulent concealment to toll the statute of limitations on royalty payments

Last fall, the Court denied the petition for review in Shell Oil Co., et al. v. Ralph Ross, No. 10-0429 (DDB). The issue was whether the court of appeals was right that the royalty owner in this case had proven an exception to the statute of limitations that would otherwise have defeated their claim against Shell. The Court denied review without requesting full briefs.

Shell filed a motion for rehearing. Along the way, there were three amicus filings by industry groups and one by a competing energy company, all urging the Court to grant rehearing to avoid what they saw as negative consequences from the rule announced by the court of appeals. (( As with most of the cases I mention on the blog, you can reach the briefs and list of amicus parties through the “DDB” link. ))

That’s a little more conventional pattern than the grants of rehearing in last week’s orders. The rehearing stage has become the season for amicus groups to flock. It is also, unfortunately, the time when the odds are most stacked against the party they support.

With today’s order, the Court granted rehearing without granting the underlying petition. The case has been returned to the pool of pending cases, and the Court has now requested full merits briefs.