With the February 28 orders list, the Texas Supreme Court issued one opinion. It also granted rehearing in a petition that had previously been denied.

Opinion

“Major transaction” venue clauses

Texas Civil Practice and Remedies Code §15.020 gives special weight to contractual choice-of-forum clauses when the transaction size exceeds $1 million.

This dispute emerges from a failed limited partnership. One of the limited partners brought suit against other participants in the venture, but not the entity itself (which was in bankruptcy). The plaintiff below (Richey) sued Fisher and Boudreaux in Wise County for a variety of claims including defamation, common-law fraud, breach of fiduciary duty, and securities violations. The defendants sought mandamus relief, either to obtain dismissal of the claims on standing grounds or a transfer to Tarrant County, the venue selected by the contract.

Standing and Jurisdiction

The Court first held that outright dismissal of Richey’s claims was inappropriate because his allegations suggested he was “personally aggrieved” enough to proceed. Among other examples, the opinion noted allegations that Richey had contributed $1 million that the other limited partners failed to make and that he was personally defamed.

The Court also rejected the argument that Richey’s claims were jurisdictionally barred because they should have been filed against Nighthawk itself, which is in federal bankruptcy court. The opinion explained that whether the claims here “should have been brought against another party … is not a question of jurisdiction requiring dismissal, but is a question of liability.”

Transfer to Tarrant County

The Court then examined where the claims should be heard. The contract for the transaction that led to this lawsuit included a forum-selection clause, and the overall transaction size exceeded the $1 million threshold.

Richey argued that his claims were insufficiently related to the contract containing the provision, both because his tort claims did not “arise from” the sale contract and because the partnership agreement creating some of the duties contained no such clause.

In determining if Richey’s claims fell within the major-transaction statute, the Court borrowed its analysis for forum-selection clauses more generally — what it calls a “a common-sense examination of the substance of the claims.” Here, the Court concluded that the tort theories were “in substance” trying to recover for damages flowing from the contract containing the clause.

The Court also rejected the argument that the statute governing defamation venue — under which suit “can only be maintained” in the county of the plaintiff’s residence (Wise County) — trumps the major-transaction statute. The Court concluded that, although a plaintiff generally has his choice among the various “mandatory” venue statutes when they conflict, here the Legislature intended for the major-transaction statute to control over other conflicting provisions, making Tarrant County the only permisible venue.

Rehearing Grant

The Court originally denied review of this petition last August. The motion for rehearing argued that the issue about Texas covenants not to compete presented here is entangled with the issue in another pending case, Exxon Mobil Corporation v. William T. Drennen, III, No. 12-0621 . The Court heard oral argument in Drennen last November, and that case remains pending.

With these orders, the Court has granted rehearing of the petition and reinstated it to the docket, but it has not yet requested full briefing. The Court will, presumably, reevaluate the situation once it announces a judgment in Drennen.

The Texas Supreme Court published a quiet orders list this week. No opinions were issued, and no cases were chosen for oral argument.

Next week, the Court will travel to Hillsboro for a special oral argument sitting on Thursday. Two cases are on the docket:

• Ashish Patel, Anverali Satani, Nazira Momin... v. Texas Department of Licensing and Regulation, et al., No. 12-0657 – a case about state regulation of “eyebrow threaders” as cosmetologists

• Gilbert Wheeler, Inc. v. Enbridge Pipelines (East Texas), L.P., No. 13-0234 – a dispute over how to measure the damages that a property owner suffered from a pipeline across a property easement

With this week’s orders list, the Texas Supreme Court chose three cases for oral argument. One of them will be heard in April; the other two appear to be waiting for the fall calendar.

The Court also issued a slightly corrected opinion in Coinmach Corp. f/k/a Solon Automated Services, Inc. v. Aspenwood Apartment Corp., No. 11-0213 while denying rehearing.

Chosen for Argument

Standards for reviewing parental termination

On April 22, 2014, the Court will hear In re A.B. and H.B., children, No. 13-0749 .

This is a parental-termination case, and keeping with the Court’s recent pattern, it has been allotted a special hearing date rather than waiting in a queue with other petitions.

The petition is framed to attack the “factual sufficiency” standards employed by the court of appeals, a question rarely presented but that comes up often in courts below. With that in mind, it’s possible that an opinion here might have ramifications beyond the family law context.

How commercial property insurance applies to multiple sites listed under a single policy

In RSUI Indemnity Company v. The Lynd Company, No. 13-0080 , the petition asks the Court to decide whether the policy at issue is a “scheduled” policy or a “blanket” policy, which has ramifications for what arguments an insurer can make to limit its exposure.

The court of appeals heard the case en banc and divided 4-3, with one of the four justices in the majority writing separately to encourage the Court to grant review.

Does the State automatically freeze the effect of an adverse judgment by filing an appeal?

If you litigate against state entities, you may be curious to follow In re State Board for Educator Certification, No. 13-0537 , which asks the Court to clarify the state’s ability to supersede judgments without posting a bond.

The agency has suspended an educator’s license. The trial court held that was improper and, after the agency filed an appeal, issued an order denying it the ability to supersede that judgment. This mandamus petition asks the Court to rule that the trial court lacked any discretion in the matter.

The Texas Supreme Court was once again closed on Friday for weather that might make the rest of the south jealous, but is a little cold for Texas.

Despite being closed to new filings, the clerk’s office rolled out the regular weekly orders. It included no grants or opinions.

The week of February 10th brings another private conference of the Justices. If the pattern holds, we may see a few grants, or possibly some opinions, as Valentine’s Day treats from the Court.

The headliners from today’s orders lists were the two denials of rehearing in previously argued cases. In both, the Court issued new opinions that addressed concerns that amicus groups raised on rehearing.

If you advise amicus groups, this is an interesting study of the power, and limits, of having outside groups weigh in on rehearing.

A particular contrast between the two is the Court’s approach to hypothetical future scenarios. In Finance Commission, the Court entertained the questions raised on rehearing and offered clarifying thoughts about how its holding applied to future scenarios. In Neely, the Court noted a question raised by amicus media groups but, as the facts before it did not raise the precise scenario, “[w]e thus, as we must, leave open the question.”

The contrast here could reflect the procedural difference between what was (effectively) a prospective rules challenge in Finance Commission and a narrow summary-judgment appeal about one person’s concrete claim in Neely.

Opinions

Added clarity about the future of home-equity lending

This case applied the Texas Constitution’s unique and very detailed protections of home-equity lending to a set of Finance Commission rules that were challenged by lenders and borrowers, coming from different directions. I wrote a substantive overview of the opinion last summer.

Today, the Court issued a supplemental opinion that addresses questions raised by various amici and the lenders about how the Court’s guidance will apply to future loans.

The two major points were:

• The Court clarified a substantive footnote in its original opinion distinguishing “front-end fees” from “interest paid in time.” The lenders and amici asked what happens to interest paid at the front-end rather than over time, such as “per diem interest” or “discount points.” The Court agreed that both of these categories are still “interest” under its definition and, therefore, not subject to the strict 3% cap on fees.

• The Court reiterated that the the power of attorney often signed to facilitate closing is a part of the process that must be executed in a formal location (at the lender’s office, a title company, or an attorney’s office). Imposing that formality was the intent behind requiring that closing documents be signed in such a location, and balancing that consumer inconvenience against the gain in consumer protection was up to those who drafted the provision.

No(t yet any) defamation immunity for third-party allegations

BYRON D. NEELY, INDIVIDUALLY, AND BYRON D. NEELY, M.D., P.A. v. NANCI WILSON, CBS STATIONS GROUP OF TEXAS, L.P., D/B/A KEYE-TV AND VIACOM, INC., No. 11-0228

Opinion
^*Corrected Opinion

Dissenting

Dissenting

In June, the Court’s original 5-3 decision in the Neely case led to protests that it was not doing enough to protect journalists who report on ongoing investigations. Media groups, as amicus, argued that a robust “third-party allegation rule” was needed.

A motion for rehearing was filed, along with two more amicus briefs. Today, the Court denied rehearing, but issued two new opinions — a corrected majority opinion and a new dissent from denial of rehearing by Justice Lehrmann.¹

The corrected opinion has a number of textual edits, but the substantive changes center on new footnote 3. The Court first notes that it has not, yet, reached the question of whether a media defendant would be protected if it made a perfectly accurate report about a third-party investigation. But then it goes on to explain why this is not the case for such a pronouncement:

We conclude there is a fact issue as to the truth or falsity of the gist of the media defendant’ broadcast indicating the physician was disciplined for operating on patients while taking dangerous drugs or controlled substances. Importantly, this fact issue as to truth is likewise a fact issue as to accuracy. Though the media defendants advocate for accuracy as the test for truthfulness of the gist, given our holding concerning the gist, such a rule would not shield the media defendants here. We thus, as we must, leave open the question of whether a broadcast whose gist is merely that allegations were made is substantially true if the allegations were accurately repeated. See Heckman v. Williamson Cnty., 369 S.W.3d 137, 147 (Tex. 2012) (discussing prohibition on rendering advisory opinions).

Because announcing a new rule of law would not actually affect these claims, the Court stated that it “must[] leave open the question.”

One’s feeling about the modal auxiliary verb might depend on philosophy or temperament. But the Court certainly can, when it wishes, wait to decide thorny questions until a case presents those facts squarely enough.

The Texas Supreme Court is officially closed today because of what, at least in Austin, passes for a snow day.

Despite the weather, the clerk’s office did roll out a very short weekly orders list with some petition denials accumulated from earlier in the week.

The Court issued opinion in four cases with today’s orders list. It granted review in six cases in a special orders list released Wednesday (post about the grants).

Whether the Railroad Commission can approve a utility rate that will vary over time, without additional hearings for each adjustment

TEXAS COAST UTILITIES COALITION v. RAILROAD COMMISSION OF TEXAS AND CENTERPOINT ENERGY RESOURCES CORP. D/B/A CENTERPOINT ENERGY ENTEX AND CENTERPOINT ENERGY TEXAS GAS, No. 12-0102

Opinion of the Court

The gas utility submitted, and the Railroad Commission approved, a rate schedule that included a clause allowing the utility to raise (or in theory lower) the rates over time, without the need for additional hearings each time. This clause, which they called a “cost of service adjustment” (COSA), required the utility to do similar calculations to what it might do when submitting proposed rates to a regulator, and then to show its work by making a public filing.

The challenge in the Texas Supreme Court was whether the Commission had the authority to approve such a clause. The court of appeals held that it did, and the Texas Supreme Court agreed.

Readers that are not deeply immersed in utility law might prefer to skip to the footnotes, particularly footnote 16 about agency deference. The footnote acknowledges that the Texas Supreme Court has previously talked about giving an agency’s view of a rule “serious consideration.”

Relying on these holdings, the court of appeals in this case decided to “defer” to the Commission’s construction [of its statute]. The parties and certain amici disagree whether such deference was appropriate in this case, and some urge that we use this case as an opportunity to add clarity to the so-called agency deference doctrine. Because we independently conclude that [the Commission had authority], we need not “defer to” the Commission’s construction or give it “serious consideration,” and we do not agree that this is an appropriate case to provide any clarity that may be needed.

This is hardly a warm embrace of “the so-called agency deference doctrine.” But any clarification of how agency deference squares with the form of textual analysis preferred by the Texas Supreme Court will wait for another case.

A contractor who promises to work in a “good and workmanlike manner” does not forfeit CGL coverage

EWING CONSTRUCTION COMPANY, INCORPORATED v. AMERISURE INSURANCE COMPANY, No. 12-0661

Opinion of the Court

The Court accepted a certified question from the Fifth Circuit about Commercial General Liability (CGL) insurance policies (previous post).

Today, it answers this question:

Does a general contractor that enters into a contract in which it agrees to perform its construction work in a good and workmanlike manner, without more specific provisions enlarging this obligation, “assume liability” for damages arising out of the contractor’s defective work so as to trigger the Contractual Liability Exclusion.

The Court answered no.

The dispute here is whether the insurance covers certain legal claims being made against the contractor, such that the insurer will pay for a defense or ultimately pay the claims. Reading the policy is a study in double negatives. The Court focuses on an exclusion which is, in turn, limited by an exception. The exclusion is for certain contract claims, including those one is “obligated to pay … by reason of the assumption of liability in a contract or agreement.” The exception carved out of that exclusion is for obligations they insured would have owed regardless of the contract or those specified in an “insured contract.”

Applying the framework from Gilbert Texas Construction, L.P. v. Underwriters at Lloyd's London, No. 08-0246 , the Court held that a provision in which a contractor promised to do work “in a good and workmanlike manner” did not trigger the exclusion at all (and thus need not fit into an exception). That is because the language “did not add anything to the obligation [the contractor] has under general law to comply with the contract’s terms and to exercise ordinary care in doing so.” Thus, the insurer could not invoke this exclusion to deny coverage.

With this issue of Texas law resolved, the case returns to the Fifth Circuit.

Tax exemptions for community housing development organizations

GALVESTON CENTRAL APPRAISAL DISTRICT v. TRQ CAPTAIN'S LANDING, A TEXAS LIMITED PARTNERSHIP AND AMERICAN HOUSING FOUNDATION, A TEXAS NON PROFIT CORPORATION, No. 07-0010

Opinion of the Court

No, your eyes aren’t failing you. That is indeed an “07” docket number. This case was argued in January 2008. It was abated while still pending in August 2009, because one of the corporate entities involved filed for bankruptcy. With today’s orders, the Court both reinstates the case to its active docket and announces its judgment.

This case involves how property-tax exemptions apply to community housing development organizations (CHDOs). While this case was pending, the Court decided AHF-Arbors at Huntsville I, LLC and AHF-Arbors at Huntsville Ii, LLC v. Walker County Appraisal District, No. 10-0714 , which resolved one of the issues here: It is sufficient if the CHDO holds equitable title to the property; formal legal title is not required.

The other issue was whether the application for an exemption here had been timely. On the facts of this case, that timing issue actually relates to the issue of legal versus equitable title. Because the CHDO applied for a tax exemption within 30 days of acquiring its equitable title, the Court holds that it was timely under the statute.

Permissible evidence for parental termination

IN THE INTEREST OF K.N.D., A CHILD, No. 13-0257

Per Curiam

The facts here, as in most parental-termination cases, are unfortunate. The mother’s age is not listed in the opinion, but her name (like the child’s) is also rendered as initials, suggesting that she, too, might be a minor.

The trial court heard evidence of the mother’s “status as a prostitute” and some previous relationships involving domestic violence. The court of appeals held, however, that the broader record did not support removal for “abuse or neglect” because it did not support an inference that the mother (whose rights were being terminated) had been the cause. It reasoned that “[e]vidence relating to past abuse or neglect of children other than the removed child is not relevant [under the statute].”

Applying its recent decision in In re E.C.R., a child, No. 12-0744 , the Texas Supreme Court disagreed and reversed. The Court quoted its language from In re E.C.R. stating that the concept of abuse under the statute is broader and “necessarily includes the risks or threats of the environment in which the child is placed.”

As I speculated last Friday, the Court did issue a mid-week orders list with grants today for its early February argument calendar.

The surprise is that some of today’s grants are going to be heard on February 27, 2014 at a special sitting in Hillsboro. The Court has chosen two cases for that day, which is typical for days when it travels to hear oral argument.

The Court calendar lists February 25 and 26 as potential argument dates as well, but no cases have (yet) been set for those dates. With no private conferences between now and February 11, today’s may be the last set of grants to be argued this Term.

New Grants

Six cases were chosen for argument. In the interest of getting this post out quickly, I’m borrowing Osler McCarthy’s summaries of the issues.

February 5, 2014

• Rahul K. Nath, M.D. v. Texas Children's Hospital and Baylor College of Medicine, No. 12-0620 : “The principal issues in this appeal from client sanctions for alleged litigation abuse are (1) whether Dr. Nath waived his challenge to the sanctions in the Supreme Court; (2) whether the sanctions — more than $1.3 million for attorney fees for two defendants — were unbridled; and (3) whether the sanctions violate constitutional protections established in TransAmerican Natural Gas Corp. v. Powell.“

• Marcia Fuller French, et al. v. Occidental Permian Ltd., No. 12-1002 : “In this case contesting the royalty value of minerals recovered by carbon-dioxide-injection, the principal issues are (1) whether the gas should be valued in its ‘native’ state, before extraction, or at the wellhead commingled with CO₂; (2) whether removing, compressing and transporting CO₂ should be classified as production operations; and (3) whether CO₂ removal at an off-site processing plant for reuse is a production or post-production operation.”

February 6, 2014

• City of Houston v. Shayn A. Proler, No. 12-1006 : “Principal issues in this employment-discrimination suit are (1) whether a fire captain’s reassignment as unfit from “fire suppression” work to training duties — allegedly because he avoided firefighting — constituted unlawful discrimination without a medical evaluation and (2) whether the trial court properly gave injunctive relief without a damages award and the city, in response to an arbitration order, returned him to firefighting duty before he filed his lawsuit.”

• In re State Bar of Texas, No. 13-0161 : “In this mandamus action related to disciplinary proceedings against prosecutors for withholding exculpatory evidence, a principal issue is whether the trial court abused its discretion by denying the commission’s use of a partial criminal-trial transcript from an expunged case.

February 27, 2014 (Hillsboro)

• Ashish Patel, Anverali Satani, Nazira Momin... v. Texas Department of Licensing and Regulation, et al., No. 12-0657 : “The principal issues in this challenge to state regulation of ‘eyebrow threaders’ as cosmetologists are (1) whether the state has immunity from declaratory-judgment claims raising constitutional challenges to statutes; (2) whether the suit is capable of judicial disposition, on standing or ripeness grounds or by seeking redundant remedies; and (3) whether this due-course-of-law challenge under the Texas Constitution should be evaluated under a ‘real and substantial’ test and not by a rational-basis analysis.

• Gilbert Wheeler, Inc. v. Enbridge Pipelines (East Texas), L.P., No. 13-0234 : “In this case by landowners seeking property damages for violation of a pipeline right-of-way easement agreement, the principal issues are (1) whether the cost to restore the property is the proper damages measure in this contract-breach case and (2) whether the appeals court erred by holding that the landowners waived their claims by failing to submit a jury question on the nature of the property injury.”