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 case is In re Stephanie Lee, No. 11-0732. It’s a mandamus challenging a trial court’s decision not to approve a mediated settlement agreement in a custody dispute.

According to the article, this case is the first time in about twenty years that the family law section of the state bar has weighed in with a Texas Supreme Court amicus brief.

The State Bar argues in its amicus brief (PDF) that the statute allowing these mediated settlement agreements limits the trial court’s discretion to second-guess the decisions made about the child’s best interests. The practical concern is that litigants are less likely to choose mediation if they fear that the trial court will simply reject the conclusions.

The State itself (through OSG) filed an amicus brief (PDF) last month taking the opposite view, arguing that the trial court has an overarching duty to look out for the best interest of the child when entering family-law orders.

Hat tip: Disputing

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.

The case is The Episcopal Diocese of Fort Worth, et al. v. The Episcopal Church, et al, No. 11-0265. You can read the jurisdictional statement or see other briefs and filings.

The dispute arose after the Forth Worth diocese of the Episcopal Church broke away from the national entity over doctrinal differences. The question was: Who owns the property held by the Fort Worth diocese?

After The Episcopal Church (“TEC”) began departing from traditional church practices and beliefs, both clergy and lay delegates of the Episcopal Diocese of Fort Worth (“the Diocese”) voted by a 4-to-1 margin to remove references to TEC from the Diocese’s Constitution. (28CR5962 (¶7)). Whether a diocese can withdraw from TEC is not a matter for the courts. But property ownership is, and the deeds, church constitutions, and state statutes show the Diocese is entitled to keep property that it has bought, built, and maintained for decades without TEC contributing a dime.

The lower court determined that it had no power to determine this property dispute without offending the First Amendment. By noting probable jurisdiction over this direct appeal, it will take up the underlying constitutional question of when courts can resolve property disputes that involve church entities.

The Texas Constitution prohibits the Legislature from imposing an income tax unless the voters of the state have approved it through a statewide referendum. Tex. Const. art. VIII, § 24(a).

Allcat argues that the current Texas franchise tax violates this prohibition because it is calculated based on the margins earned by partnerships. Normally, tax challenges must be brought in Travis County district courts. But the bill creating this new franchise tax also contained a provision purporting to vest “original and exclusive jurisdiction” over constitutional challenges in the Supreme Court of Texas. The bill put no time limit on when taxpayers could file suit — this one was brought about five years into the new system — but it gives the Texas Supreme Court only 120 days from when suit is filed to resolve a challenge.

The Texas Supreme Court issued its decision around 4:00 today, the last day by that clock. Here’s what the orders list says about the outcome:

The Court denies Allcat’s requests for relief relating to its facial challenge because the Act [creating the Texas business-margins tax] does not violate Article VIII, Section 24 of the Constitution. The Court dismisses the as-applied challenge and attorney’s fees claim for lack of jurisdiction.

The vote breakdown was either 7-2 or 9-0, depending on how you frame it. The majority upheld the tax on the merits. The dissent would have dismissed the appeal for want of jurisdiction (also leaving the tax in place). The Justices disagreed about why, but none of them would have struck down the margins tax today.

Justice Johnson delivered the majority opinion, joined by Chief Justice Jefferson, Justice Hecht, Justice Wainwright, Justice Medina, Justice Green, and Justice Guzman. Justice Willett delivered an opinion concurring in part and dissenting in part. He was joined by Justice Lehrmann.

Majority: This is not a state income tax, so it did not need to be approved by the voters

The majority concluded that the Texas business-margins tax on partnership income was not a personal-income tax.

In what turned out to be the pivotal analytical step, the Court held that it could interpret the constitutional provision in light of the Texas Legislature’s choice (through separate legislation) to classify partnerships as separate legal entities rather than just shadows of their members. Because a partnership is a separate legal entity, the majority reasoned, the partnership’s income did not yet belong to the partnership’s individual members when the tax was assessed.

Had Texas partnership statutes not adopted that view of partnerships, this case might have turned out differently.

Everyone agrees: The Court lacked jurisdiction to hear the narrower, fact-specific challenges brought by Allcat

The majority concluded that the statute only authorized it to decide the facial constitutionality of the statute. The Court thus refused to reach the taxpayers’ challenges based on other theories, including their argument that the taxes violated the requirement that taxes be equal and uniform.

This could spell some trouble for the taxpayers in Nestle USA, Inc. v. Combs, No. 11-0885, which raises (among other arguments) the same “equal and uniform” issue.

Where the Justices disagree: Does the Court have jurisdiction to even address this question on the merits?

The Court was divided on two questions about its own power, relative to that of the Texas Legislature: (1) did the Legislature have power to confer this type of jurisdiction on the Court? and (2) if so, did it have power to impose a 120-day deadline on the Court to resolve this challenge?

The jurisdictional grant

The Texas Constitution allows the Legislature to expand the Texas Supreme Court’s original jurisdiction to issue certain writs of mandamus.

The majority held that the expansion of jurisdiction here was valid. The dissent would have held that the extra jurisdictional grant in the statute was ineffective because it was not, in either text or substance, about the Court’s traditional mandamus authority.

The dissent notes that the statute did not use the word “mandamus” but instead authorized the Court to “issue injunctive or declaratory relief in connection with the [constitutional] challenge.” Taking a strict view of the statute, the dissent would have held this was an ineffective attempt to confer non-mandamus power, not a grant of mandamus power at all. The majority took the view that, because the Legislature meant to confer some power, it should be construed as mandamus authority to effectuate that intent.

But the dissent’s criticism went beyond word choice. The dissent concluded that the review conducted by the majority broke from normal mandamus practice. Specifically, the dissent contended that there was no “abuse of discretion” or “ministerial duty” involved here — traditionally the first element of mandamus relief. Instead, the dissent saw this proceeding as simply reaching out to decide an interesting and important legal question rather than as deciding whether to issue an extraordinary writ:

Not long ago, one of my colleagues lamented that the Court was dragging Texas into “a whole new world” of mandamus practice. He criticized the Court for stretching the writ’s second element (“no adequate remedy at law”) beyond what he believed our caselaw allowed. Today, the Court turns its sights to mandamus’s first element, and in my view dismantles an important limit on the judiciary’s writ power. I fear that the lure of instant Supreme Court review of select legislation will prove increasingly irresistible.

The majority sought a pragmatic way to accomplish the Legislature’s goals (expedited review) rather than trying to announce a new framework for mandamus practice. With that in mind, I don’t think the dissent really expects a flood of these cases to percolate up from private litigants. But I would not be too surprised if the Legislature embraces this more relaxed view of “mandamus” authority to vest the Court with original review of other questions.

The time limit

The Legislature also set a 120-day clock for the Texas Supreme Court to resolve challenges brought under this special jurisdictional grant. The parties did not challenge the validity of that clock. The majority says that the clock was, accordingly, not at issue.

But there is little doubt that clock motivated the Court’s timing here — the schedule was compressed, and the opinion was issued on the last day of the 120-day period, near the close of business.

The dissent questioned the Legislature’s power to order the Court to act within a strict deadline.

By setting a hard-and-fast deadline for deciding a case, it threatens to interfere with our sworn adjudicatory duties under our Constitution.

Because of the importance of the franchise-tax issue, the dissent argued,

It … demands, and deserves, our most meticulous study. Fast-forwarding and vacuum-packing a multi-billion dollar challenge to a major piece of the Texas tax system does a grave disservice not only to the parties involved, but also to the wider public that deserves methodically researched and reasoned Supreme Court rulings to guide their actions. This case may have been filed 120 days ago, but we heard the parties’ oral arguments only 35 days ago. Allcat might justifiably wonder whether today’s outcome might have been different had the Court taken more time to marinate in these high-stakes questions of law.

In sum, I have reservations over the constitutionality of section 24(b). The Court refrains from addressing the issue, as no party raised it. Perhaps a future case will squarely ask whether the Constitution permits one branch of government to instruct another on core matters in this way.

The majority did not, precisely, defend the clock. It acknowledged that there were separation-of-powers limits on the Legislature’s true power to impose a deadline. Instead, the majority defended the Court’s own choice to comply with the Legislature’s preference for a decision to be made on that clock, even if not strictly required to do so:

We see no valid reason that this Court cannot cooperate with priorities expressed by other branches of government so long as we fulfill our constitutional duties and neither impair our judicial prerogatives and functions, nor impair the rights of the parties.

With a 7-2 vote, and no Justices prepared to strike down the tax, it does not appear that this case was on the verge of turning out differently had the clock been a little longer — or had it been struck down.

But if the internal vote had been 5-4, the Court might have made a different calculation about waiting.

When the Legislature enacts its next big structural-reform legislation — perhaps in response, once again, to pressures (or court orders) about school finance or tax reform — we may see it authorize expedited review in the Texas Supreme Court. Next time, I’d expect to see the bill use the word “mandamus.” And given the Legislature’s continued focus on how quickly the Court resolves cases, I’d also expect to see the Legislature continue to prescribe time limits.

The case was brought as an original proceeding in the Texas Supreme Court, and the 120-day clock was specified by the statute invoked by the taxpayers. The deadline appears to be the Monday after Thanksgiving.

Next week is a short week, so the next full list should be released on December 2. The next round of oral arguments begins December 6.

Cities could not directly challenge gas-rate increases under the GRIP statute

Atmos Energy Corporation, Centerpoint Energy Resources Corporation, and Texas Gas Service Company v. The Cities Of Allen, et al. and Railroad Commission of Texas, No. 10-0375 (Wainwright, J.) PDF

The narrow question here is the validity of rate increases by some gas utilities under a special statute providing for interim repayments of certain costs (referred to by the shorthand “GRIP”). The utilities filed these rate increases, and these 51 cities took formal action to refuse the increases. But the applicable statute gave the Railroad Commission exclusive appellate jurisdiction. The utilities took those appeals, and the Commission set aside the city’s objections to the rate increases.

With today’s holding, the Texas Supreme Court concluded:

1. The statute’s grant of exclusive appellate jurisdiction gave the Commission power to override city determinations.

2. No evidentiary hearing (“contested case”) was required here because the GRIP statute did not contemplate that detailed factual review. Instead of that normal process, the Court explained, the GRIP statute provided different protections, including possible refunds in later rate cases. ¹

The latest wrongful-imprisonment case has been settled

In re Larry Charles Fuller, No. 11-0018

The Court had agreed to hear oral argument in a new challenge to how the Comptroller handled a compensation claim for wrongful imprisonment. The parties reached a settlement and, with today’s orders list, the Court has formally dismissed the case.

Amicus argument in a (potentially) big products-liability case

Centocor, Inc. v. Patricia Hamilton and Thomas Hamilton, No. 10-0223 (to be argued Dec. 8, 2011)

Today, the Court granted leave for an amicus to appear at argument in this case about how advertising interacts with the normal tort duties for makers of prescription drugs. One question is the extent to which drug makers can still rely on a doctor (the “learned intermediary”) to provide disclaimers when the maker has directly advertised the drug to consumers.

The amicus brief was a joint filing by the Texas Medical Association, Texas Medical Liability Trust and Texas Alliance for Patient Access. The Court’s order does not say which amicus group is appearing (I’ll update this post when I know), but it does suggest that And extra time is being devoted to this case. The order shows a time division of 20/20/10 rather than the usual 40 minutes total.

1. See page 12: “[A] municipality could file a rate case on its own motion whenever it perceives the need after a GRIP filing. Tex. Util. Code § 104.151. These protections further reinforce our view that the interim GRIP filings are subject only to a ministerial review of the statutory requirements by the Commission.”

It didn’t take long for that road to attract other travelers.

There’s now a second case challenging a different aspect of the margins tax. Nestle USA, Inc., Switchplace, LLC, and NSBMA, LP v. Susan Combs, No. 11-0855. While Allcat challenged how the tax applied to partnerships (a small category of taxpayers), this challenge attacks the rate structure for a lack of uniformity (under Texas law) and for violating the federal due process and commerce clauses.

Today, the Texas Supreme Court has ordered an accelerated briefing schedule for this case, with an argument to be held January 12, 2012.

Well before then, we should have the Court’s answer to the Allcat case, which if nothing else should shed some light on this unusual procedure for getting constitutional issues to the Court.

So, when the Texas Supreme Court grants rehearing, I make a point to read the motions to see what caught the Court’s eye.

Last week, it granted rehearing in Mabon Limited v. Afri-Carib Enterprises, Inc., No. 09-0715, about a default judgment when the defendant did not get notice of the trial court hearing. The questions were procedural and somewhat dry, about what level of diligence is needed for a party to use a “bill of review” process to bring its challenge after the time for appeal has expired.

So how did David Holman, counsel for Mabon Limited, turn this into something dramatic?

The entire twelve-page motion for rehearing is formatted as a transcript of a “fictional exchange between an Editor (‘ED’) of Corporate Counsel Quarterly and a Legal Reporter (‘LR’).” Using this literary device let counsel put this criticism into other voices (albeit fictional ones).

The two characters discuss the case, walking through some of the twists and turns in a conversational way. The motion concludes by turning what often seems like an empty warning (“the press won’t like this!”) into something cute:

ED: Well, okay. I’ll tell you, here’s what we’re going to do. Let’s wait before we run this story to see if the Texas Supreme Court grants rehearing to prevent the Fourteenth Court of Appeals’ opinion from becoming law?

LR: Good idea.

ED: I’ll keep my fingers crossed.

LR: Me too.

The Texas Supreme Court’s response? It granted rehearing to reinstate the case to its docket, which might mean this pilot gets picked up for a full season.¹

Was it the screenplay, or the plot?

The dialogue format wasn’t the only unusual feature of this case. It turns out that both sides were seeking rehearing. Although they disagreed with each other, they both agreed that at least something was wrong below.

We don’t yet know who the Court will ultimately side with — or if it will eventually deny the petition again without reaching the merits.² So, until those ratings are in, you may not want to hire a desperate Liz Lemon or Aaron Sorkin to ghostwrite your next motion — just yet.

1. The petitions were denied on February 25, 2011, so the Court was approaching its 180-day deadline for rehearing motions. This grant of rehearing gives it more time to mull over these issues.
2. That’s still an option.

David Coale, former head of the State Bar appellate section, has started a new blog about the Fifth Circuit. It’s called 600 Camp, after the address of the John Minor Wisdom Courthouse in New Orleans.

Mandatory appellate mediation turns out to be mandatory

Disputing has a post about what happens when a party walks out before a court-ordered appellate mediation has run its course. The title gives away the ending: “Texas Court of Appeals Dismisses Appeal Because Appellant Walked Out of the Court-Ordered Mediation”

This happened in the Waco Court of Appeals. The court’s notice specified that dismissal would follow if the appellant did not attend the mediation. The court’s opinion is here.

Election season is underway

Morgan Smith of the Texas Tribune has the first piece I’ve seen about the 2012 court elections. Her story is about former Justice Steve Smith’s filing to, once again, run against Justice Willett for the Republican nomination.

Oral Arguments This Week

You can check out past and current arguments on the St. Mary’s video archives page.

Tuesday

• SafeShred, Inc. v. Louis Martinez, III, No. 10-0426. Are there exemplary damages for a Sabine Pilot claim (wrongful firing for an employee refusing to do an illegal act) and, if so, was the amount of exemplary damages awarded here excessive? (>> earlier post)

• Shell Oil Company, et al. v. Ralph Ross, No. 10-0429. Broadly, the case is about how the statute of limitations applies to royalty claims when there is an allegation of fraudulent concealment.

• Weeks Marine, Inc. v. Maximino Garza, No. 10-0435. A Jones Act (maritime) case about how to divide responsibility between the worker and the employer. >> earlier post

Wednesday

• Natural Gas Pipeline Company of America v. William Justiss, et al., No. 10-0451. In a nuisance claim about a reduction in property value alleged to have been caused by the gas pipeline: (1) how much worse must the condition get to re-start the statute of limitations and (2) what evidence is proper to show the reduction in property value? A potentially much broader issue here is the petitioner’s request for the Court to limit the “property owner rule” that (traditionally) lets an owner testify as to its value without the need to hire an expert witness.

• Hearts Bluff Game Ranch, Inc. v. The State Of Texas and the Texas Water Development Board, No. 10-0491. Can the State’s actions, which were alleged to have directly interfered with the issuance of a federal permit, constitute a taking under state law? >> earlier Texas Tribune article

• Matthew W. Wasserman, M.D. v. Christina Bergeron Gugel, No. 10-0513. Do “health care liability claims” include allegations of assault or sexual assault by health-care providers? >> earlier post

Thursday

• Port Elevator-Brownsville, LLC V. Rogelio Casados, et al., No. 10-0523. Does the bar against lawsuits created by the workers compensation law apply equally to suits by temporary workers?

• In re United Scaffolding, Inc., No. 10-0526. How much specificity is needed in an order granting a new trial based on the great weight of the evidence?

• Rusk State Hospital v. Dennis Black, et al., No. 10-0548. What should courts do when a government agency raises sovereign immunity during a limited interlocutory appeal challenging something completely different?