Supreme Court of Texas Blog: Legal Issues Before the Texas Supreme Court
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Category: 'Order Lists'

Catching up on recent (quiet) summer orders lists

August 18th, 2014 · No Comments

The Texas Supreme Court is returning from a summer break, and as it happens, so am I.

This most recent August 15th orders list was a quiet one, with no opinions issued and no grants.

The same was true the week before, the week before that, the week before that, and the week before that.

Looking forward, the Court’s public calendar shows two, two-day private conferences over the next two weeks, so it’s fair to expect some end-of-term orders to reduce the number of argued and pending cases that will be carried forward into the Court’s new accounting year on September 1.

Tags: Order Lists

Eight sets of opinions, one grant [Jun. 20, 2014]

June 20th, 2014 · Comments Off

With today’s orders list, the Texas Supreme Court issued opinions in eight cases and chose one new case to be argued this October.

The orders included two dissenting opinions — which are the first since September’s IN RE STEPHANIE LEE, No. 11-0732 . It’s been a very agreeable year so far at the Court, which poses a challenge to those of us who track court statistics.

The rule of thumb at the U.S. Supreme Court is that the more divided cases tend to linger until the end of the Term. We’ll see if the same pattern holds this year in Austin.

Read much more

Tags: Order Lists

Three opinions, one grant – and argument dates are assigned for the Fall calendar [Jun. 13, 2014]

June 16th, 2014 · Comments Off

With its June 13, 2014 orders list, the Texas Supreme Court issued opinions in three cases. It also granted review in one new case and assigned its first argument dates for the fall.

I’ve also posted summaries from the June 6 orders and a long-overdue summary of a case about vacating an arbitration award for evident partiality.

Opinions

“Check[ing] the causation box” is harder than it may seem

The Court held that a slander-of-title claim against a tenant (who is alleged to have undermined a property sale) failed for lack of evidence of causation.

The Court emphasized that causation in this context has two aspects. It is not enough that the defendant’s conduct was a factor in causing the result. What the Court requires is evidence that, but-for the action, the harm would not have occurred.

Here, the “witnesses … never testified there was a possibility of a different outcome had [the tenant] not sent its letter.” The Court was also dismissive of the idea that some magic words in testimony could substitute for richer evidence suggesting causation. It said:

even if counsel were able to get a witness to agree to language reflecting the causation standard at issue in this case, the bare assertions … in response to carefully worded questions from counsel do not constitute evidence of causation.

In other words, a transcript that tracks the language of court opinions is not good enough to let you sleep well at night. “There is no ‘magic language’ that checks the causation box in a sufficiency-of-the-evidence review.”

Unconscionability of arbitration clauses applied to DTPA and attorney’s fee claims

A contract for the sale of cotton included an arbitration clause, selecting arbitration rules that did not at the time permit attorney’s fees.

When the cotton grower brought suit, the purchaser (Venture) invoked the arbitration clause. The district court refused to enforce the clause, and the court of appeals affirmed on the ground of unconscionability. The court of appeals focused, in particular, on the plaintiff’s allegations of a DTPA claim and request for contract attorney’s fees — remedies that were effectively barred by the arbitration procedures chosen here. The court of appeals rejected the argument that the offending portions of the arbitration should have been severed to save the rest.

The Texas Supreme Court reversed. As to the DTPA claim, it agreed with the court of appeals that requiring arbitration would be improper under the precedent of IN RE POLY-AMERICA, L.P., IND. AND D/B/A POL-TEX INTERNATIONAL, AND POLY-AMERICA GP, L.L.C., No. 04-1049 , in which the Court held that requiring arbitration of a workers compensation remedies was unconscionable. The DTPA claims at issue here are different in one way: it is at least possible for them to be waived. But this contract did not include the specific language and form elements that the law requires for an effective waiver. Thus, the Court held, the DTPA claim here cannot be arbitrated under this clause.

But the Court, unlike the court of appeals, held that this aspect of the arbitration clause could be severed, leaving the rest in place.

The opinion also has an interesting discussion of how waiver might work differently in interlocutory appeals. Here, the argument was that Venture should have expressly asked the trial court for this kind of severance before perfecting its interlocutory appeal. The Texas Supreme Court rejected the idea that this “waiver” would prevent it from reaching the question:

But this is an interlocutory appeal, and the case remains pending in the trial court. We are therefore unsure what Venture has waived. If the court merely means to suggest that Venture waived the right to complain about severance in this interlocutory appeal, the waiver argument serves only to delay a decision in the case. Conservation of time and resources recommend that we consider the issue now because nothing prevents Venture from urging severance in the trial court and, if denied, from renewing its complaint in yet another interlocutory appeal.

A guaranty agreement waives a party’s right to offset for a foreclosure sale

In a foreclosure auction, the lender has an advantaged position because they can bid using a fraction of the debt they are owed, rather than putting up cash. The Property Code recognizes that this can result in a distorted auction, one in which the seller has no incentive to bid high and other buyers do not wish to compete — leading to a sale price well below market value.

Section 51.003(c) gives the person whose property has been foreclosed some protection in this situation. If the lender buys the property in foreclosure, the borrower can prove up the true market value and receive an offset of their debt for the difference.

The wrinkle here is that the commercial loan was personally guaranteed by a principal of the business, Moayedi.

That guaranty agreement, in turn, waived “any defense … each and every such defense being hereby waived by the undersigned Guarantor.”

The Court first construed Section 51.003. It rejected Moayedi’s argument that this statue was not a defense at all, but rather an alternate way of calculating a deficiency judgment (with the same practical effect). The Court quoted the full statute and said that “the language of the statute presupposes the traditional definition of deficiency [and] provides an offset … In other words, it provides a defense.”

It then held that Moayedi’s general waiver extended to that defense and was effective.

Petition Grant

More questions about Section 51.003

Having just issued an opinion in MEHRDAD MOAYEDI v. INTERSTATE 35/CHISAM ROAD, L.P. AND MALACHI DEVELOPMENT CORPORATION, No. 12-0937 , the Court has decided to go back for more.

The petition in PLAINSCAPITAL BANK v. WILLIAM MARTIN, No. 13-0337 asks more questions about Section 51.003, including: (1) whether it creates a right to an offset when a lender resells the property on the open market rather than a foreclosure sale and (2) how to compute fair market value to compute the offset.

Argument Schedule

The Court assigned argument dates for its pending cases. This probably fills the September calendar and (almost) fills October. The October calendar includes, along with the usual sitting in Austin, a trip to Lubbock to hear arguments at Texas Tech University’s law school on October 9.

Tuesday September 16

Wednesday September 17

Thursday September 18

Thursday October 9 [at Texas Tech Law School]

Tuesday October 14

Wednesday October 15

Tags: Order Lists

Seven opinions and two grants [June 6, 2014]

June 11th, 2014 · Comments Off

With its June 6, 2014 orders list, the Texas Supreme Court issued opinions in seven cases. It also granted review in two more cases to be argued this fall.

The implied warranty of merchantability can survive into the market for used goods

The question was whether the engines in a fifty-foot yacht still carried the manufacturer’s implied warranty of merchantability after the boat was re-sold to a new buyer.1

Ultimately, the Court held that it does, at least here. (“Our answer: It depends.”)

As a general matter, the Court held that the implied warranty could still be asserted against the manufacturer even for goods marketed as “used.”

The Court recognized, however, that a waiver at the first step in the chain — by the initial purchaser — could cut off that warranty. But it held that this waiver argument had not been properly raised here because it was not timely raised as an affirmative defense under Rule 94.

A parental-termination case about more general questions of appellate procedure

The involuntary-termination statute sets out twenty different courses of parental conduct, any one of which may serve as a ground that satisfies the statute’s first prerequisite for termination. The twenty grounds are subparts (A) through (T) of Family Code §161.001(1).

The trial court found sufficient evidence to terminate a father’s parental rights for subparts (D) and (E), entering judgment to that effect. The court of appeals reversed, concluding that there was factually insufficient evidence of those grounds.

In the Texas Supreme Court, the State (through DFPS) argued that subpart (O) — a provision about failure to comply with prior court orders, which DFPS had urged below but which the trial court did not list in the judgment — also supported termination. DFPS argued that the trial court had implicitly found in its favor on that ground under Rule 299 or, alternatively, that the evidence of a subpart (O) violation was so conclusive that no finding should have been necessary because no factual dispute was even presented.

On the procedural question, the Texas Supreme Court held that the concept of an implied finding under Rule 299 about “omitted unrequested elements” of a claim did not apply where the party had requested the element. Because DFPS advanced the ground below, Rule 299 provided no basis to read it into the judgment.

On the substantive question, the Court held that the evidence was not conclusive of a violation of subchapter (O). Framing the issue, it noted the potential breadth of accepting the DFPS position:

Parents frequently fall short of strict compliance with a family-service plan’s requirements. The Department’s argument, however, accepts nothing less and thus would require termination for a parent’s imperfect compliance with the plan.

The Court held, instead, that this was a matter of degree in which “whether a parent has done enough under the family-service plan to defeat termination under subpart (O) is ordinarily a fact question.”

For that reason, mere evidence of non-compliance — even conclusive evidence that a parent was technically not in compliance — was not enough to conclusively satisfy subpart (O) “where questions of compliance and degree are raised.” Instead, the Court saw that as an embedded fact question, requiring (at least in these circumstances) some type of fact finding that the non-compliance was substantial enough to warrant termination.

Finding that subpart (O) presented an unresolved fact dispute, the Court declined to find this basis for termination to be conclusively established. It therefore left in place the court of appeals’s order remanding this to the trial court for further proceedings.

“Does a firefighter who refuses to fight fires have a ‘disability’ under state or federal law?”

It’s an old truism that how you frame the question can shape the answer. Here’s how the opinion of the Court framed this one:

Does a firefighter who refuses to fight fires have a “disability” under either state or federal law?

The answer, unsurprisingly, was no.

The analysis rejected the argument that this was a manifestation of some deeper issue, such as depression or another species of mental illness. The Court focused on the specific manifestation of the condition at work — what it called “[b]eing unable to set aside the normal fear of entering a burning building,” which is not something that “limits a major life activity” outside of work. And because there was “no evidence that the City was aware” of any treatment for depression, the Court found no evidence that the decision was motivated by any such disability.

Immunity is not waived against intentional torts

This case is about one of the quirks of Texas’s tort claims act, which waives immunity for certain kinds of negligent acts by governmental employees — but does not waive immunity for intentional torts.

Here, the tort claim involved injuries suffered during an arrest in which excessive force was used. The court of appeals concluded that, because the injury itself was not intended, the nature of this claim sounded in negligence and thus could fit within a waiver of immunity.

The Texas Supreme Court disagreed. It cited its own precedent holding that a battery tort could sound even where the actual physical contact was indirect ‐ a dinner plate snatched from the hand of someone waiting in line — so long as the nature of the contact was offensive.2 The Court concluded that “when an arrest, lawful at its inception, escalates into excessive-force allegations, the claim is for battery alone.”

Two per curiams about police officers sued over conduct during an arrest

With THE CITY OF WATAUGA v. RUSSELL GORDON, No. 13-0012 decided, the Court also issued per curiam decisions in two cases involving claims brought against police officers for alleged misconduct during an arrest:

Both cases were, procedurally, about §101.106(f) of the Tort Claims Act and held that the claims against the officer should be dismissed.

A Rule 11 agreement not embodied in a judgment cannot be enforced after plenary power expires

The parties here reached a settlement, memorialized that agreement in a Rule 11 agreement filed with the trial court, and had the trial court dismiss the underlying claims.

The question is whether the trial court has continuing jurisdiction to enforce that settlement or whether, instead, the settlement agreement is just a contract that would require a new lawsuit to enforce.

While the trial court has ongoing power to enforce its judgment, the order of dismissal here did not incorporate the terms of the Rule 11 agreement. For that reason, the Court holds that the trial court’s power to enforce those settlement terms ended soon after the dismissal order was signed.

Grants of Review

  1. Insert your own jokes about “the two happiest day of a boat owner’s life” here. []
  2. The case is Fisher v. Carrousel Motor Hotel, Inc., 424 S.W.2d 627 (Tex. 1967), which is wedged into my memory from first-year torts. []

Tags: Order Lists

No grants or opinions [May 30, 2014]

May 30th, 2014 · Comments Off

With its May 30, 2014 orders list, the Texas Supreme Court did not issue any opinions or choose any new cases for review.

Tags: Order Lists

An arbitration award is vacated for evident partiality [May 23, 2014]

May 23rd, 2014 · Comments Off

With its May 23, 2014 orders list, the Texas Supreme Court issued one opinion. It did not grant any new cases for review.

“Evident partiality” when an arbitrator fails to fully disclose the nature of his conflict

After the purchase of a power plant, Ponderosa (the buyer) sued Tenaska (the seller) to indemnify it for some liabilities that came with the property. The purchase agreement had an arbitration clause, and the parties went forward with a three-member, neutral arbitration panel in which each side would designate one of the arbitrators and the two would then choose a third.1

Tenaska was represented by Nixon Peabody, which designated Samuel Stern as its arbitrator. It made at least a partial disclosure that Stern and the law firm had previous involvement, noting that one of Stern’s ventures (Lexsite) had tried to sell it litigation-discovery services. The disclosure also stated “Nixon-Peabody and Lexsite have done no business.”

The arbitration was structured as a “baseball arbitration,” and the two sides’ proposals were two orders of magnitude apart: Tenaka proposed $1.25 million and Ponderosa proposed $125,000,000. The panel chose Ponderosa’s figure.

Subsequently, Tenaska uncovered more details of the relationship between Nixon Peabody and the arbitrator, which suggested a much deeper relationship than had been revealed. The trial court vacated the award, but the court of appeals reversed on the ground that the initial disclosure was enough to put Tenaska on notice to investigate.

The Texas Supreme Court reversed again, holding that the award should be vacated for what the statute calls evident partiality. The test asks if “the arbitrator does not disclose facts which might, to an objective observer, create a reasonable impression of the arbitrator’s partiality.” Burlington Northern R.R. Co. v. TUCO, Inc., 960 S.W.2d 629, 630 (Tex. 1997)

As the opinion summarizes the situation here:

the arbitrator failed to disclose that all of his contacts at the 700-lawyer firm were with the two lawyers that represented the party to the arbitration at issue; he owned stock in the litigation services company that was pursuing business opportunities with the firm; he served as the president of the company’s United States subsidiary; he conducted significant marketing in the United States for the company; he had additional meetings or contacts with the two lawyers in question to solicit business from the firm for the company; and he allowed one of the two lawyers to edit his disclosures to minimize the contact.

The Court found that this met the standard. It rejected the argument that merely disclosing the existence of some relationship was enough, instead looking at the significance of the undisclosed portion of the information.

However, proving that the Court is not engaged in baseball arbitration, the Court rejected both sides’ framing of the standard of proof. Tenaska contended that all it needed to do was establish that the disclosure was intentionally misleading and then, as a matter of law, the inquiry ends. Ponderosa contended (based on some other States’ standards) that the Court should require heightened proof such that a “reasonable person would have to conclude” that there was partiality. The Court rejected both extremes, instead adhering to the framing of TUCO that the disclosures “might, to an objective observer, create a reasonable impression” of partiality.

  1. Here, the third arbitrator was actually James A. Baker, former Justice of the Texas Supreme Court. []

Tags: Order Lists

Four opinions and one grant [May 16, 2014]

May 16th, 2014 · Comments Off

With today’s orders list, the Texas Supreme Court issued opinions in four cases and granted one new case for review.

The opinions today involve home-equity lending, hospital liens in personal-injury cases, what level of litigation conduct waives a contractual right to arbitrate, and parental-termination appeals.

Restructuring a loan without extending new credit does not trigger Texas’s constitutional homeowner protections

In this certified question from the Fifth Circuit, the Texas Supreme Court holds that a loan restructuring that merely recapitalizes the current debt — without extending new credit, as the Court clarifies that concept today — does not implicate Texas’s onerous constitutional requirements for a new home-equity loan.

These loan modifications folded in (“recapitalized”) past due amounts including taxes and insurance premiums, adding those amounts to the principal balance. They simultaneously lowered the interest rate, leading to a schedule of lower monthly payments.

The borrowers here argued that any increase in principal is an impermissible “extension of credit.” The Court disagreed, noting that the particular amounts being recapitalized here were for repayment of taxes and insurance, items that the borrower was already obligated to pay under the original terms. The Court called this “a mechanism for deferring payment of obligations already owed in a way that allows the borrower to retain his home.”

Indeed, throughout Chief Justice Hecht’s opinion, the Court expressed concern that too strict a ruling about loan modifications would force lenders to foreclose in situations where the borrower could, otherwise, be accommodated.

The opinion stopped short, however, of adopting the lender’s proposed rule. The lender argued that all that mattered was that “the borrower’s note is not satisfied and no new money is extended.” The Court called those aspects necessary, but refused to say they were sufficient. The Court gave an example that would fail the test: using the refinancing to cover another unrelated debt or obligation (such as credit card debt). “The test should be whether the secured obligations are those incurred under the original loan.” Here, the obligations being secured were payment of property tax and insurance premiums.

There is some room for future parties to argue about the contours of this test, on a closer set of facts. But refinancing narrowly tailored to save a house from foreclosure seems likely to fit the bill.

Hospital liens are not discharged until the insurer received payment; a joint payment to the insured is not enough

Under chapter 55 of the Texas Property Code, hospitals that treat an injured patient can assert a lien against that person’s personal-injury cause of action. By statute, the hospital charges must be “paid” before the underlying claim can be settled.

Here, the insurer made a check out jointly to the injured person and to the hospital. The injured person deposited the check without obtaining the hospital’s endorsement.

The hospital then sued the insurer, which asserted that it had completed its obligation under the law by issuing the check. The court of appeals agreed. The Texas Supreme Court did not.

Trying to resolve whether this constituted a payment, the Court turned to the UCC’s general principles about negotiable instruments. This check was drafted so that either copayee could endorse (“alternative copayees”) rather than requiring the signature of both (“nonalternative copayees”). For that reason, the Court held, the better view was that this did not constitute payment to discharge the insurer’s obligation to the hospital.

Does this mean that the hospital can now sue the insurer directly (a defendant much more likely to be able to easily satisfy a judgment)? The Court questions whether the statute creates such a cause of action but does not answer, because this was not a ground raised in the summary judgment motion. (The Court noted that the question had been discussed during the appeal and was “briefly discussed at oral argument.” That did not substitute for preservation of error.)

The Court therefore remanded the case to the trial court for further proceedings.

Litigation conduct that does not waive arbitration

In this dispute between a law firm and its former client over a contingency agreement, the question is whether the law firm has substantially invoked the litigation process so as to waive its right to arbitrate.

The first asserted waiver was that the law firm had, previously, sued a former associate over the same general subject matter — litigation in which the client became tangentially involved and was subjected to discovery. The firm did not, however, even have an arbitration clause with that former associate. The Court held this was not enough to waive the firm’s right to arbitrate against the client.

The second asserted waiver was that the law firm filed suit against the client and (eventually) moved for a no-answer default judgment before later moving for arbitration. Even this invocation of the court system was not enough to waive arbitration. The opinion characterized this as “filing limited pleadings” that “did not substantially invoke the litigation process.”

The Court therefore reversed the court of appeals and remanded for trial court grant the motion to compel arbitration.

An appellate court need only provide details of its factual sufficiency analysis when reversing a parental-termination judgment, not when affirming

In 2005, the Texas Supreme Court held that if a court of appeals holds a jury finding in a parental-termination case to be factually insufficient, its opinion must detail the reason why. The current petition asked the Texas Supreme Court to extend that same requirement to appellate decisions that affirm a jury’s finding of parental termination, given the high stakes.

The Texas Supreme Court declined to do so.

It explained that the “detail” requirement was to ensure that the court of appeals was according deference to the jury as fact-finder, an interest not implicated when the court of appeals affirms. Instead, all that is required is that the court of appeals actually apply the right standard, whether or not it details all the specific facts.

To determine whether the right standard was applied here, the Texas Supreme Court observed that the court of appeals panel that first heard this case “cited the correct standard … and subsequently devoted six pages of its opinion to articulating evidence presented at trial,” analysis attached to a dissent to the later en banc opinion. This is enough to signal “that the en banc court of appeals, though it did not specifically detail all evidence favorable … did in fact comply with the standard [of review].”

Grant: How to value billboards in condemnation cases

In STATE OF TEXAS v. CLEAR CHANNEL OUTDOOR, INC., No. 13-0053 , the State (supported by some local governments) challenges how billboards were valued in condemnation. The landowners contend that the installed billboards are part of the realty warranting compensation for their lost income. The State argues that they should, instead, be seen as a type of personal property that can be relocated.

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Programming note: I am regrettably behind on some recent orders. When I have added those historical summaries to the site, I’ll post a link in a new blog post to let you know.

Tags: Order Lists

Quiet orders list [Apr. 11, 2014]

April 11th, 2014 · Comments Off

The Texas Supreme Court did not issue any opinions or choose new cases for oral argument with today’s orders list.

The Court’s calendar for next week shows an internal conference. The following week, the Court will hear oral argument in a parental-rights termination case.

Tags: Order Lists