With the May 3 orders list, the Texas Supreme Court issued one opinion and chose one new case for oral argument on June 3, 2013. The case set for argument is IN THE INTEREST OF K.M.L., A CHILD, No. 12-0728 , the second parental-rights case that the Court has granted this spring for expedited argument.

The Court also announced its first two argument sittings for the fall, which will begin on Tuesday September 9, 2013 and Tuesday October 8, 2013. The October sitting still has some argument slots open, for the next round of petition grants.

The May 10 orders list did not include any opinions or grants.

Arbitration against a trust beneficiary

HAL RACHAL, JR. v. JOHN W. REITZ, No. 11-0708

Opinion of the Court

A written trust contained a broad arbitration clause. One of the trust’s beneficiaries, who had not personally signed the trust itself, sued the trustee for misconduct. The trustee sought to invoke the arbitration clause against the (non-signatory) beneficiary.

The court of appeals concluded that this clause could not be enforced because it was not part of “an agreement” between the trustee and the beneficiary.

The Texas Supreme Court disagreed. The Court rejected the argument that trusts do not qualify as “agreements” under the Texas Arbitration Act. Unlike traditional contracts negotiated between two parties, they are created by one party (the settlor) for the benefit of others (beneficiaries). But the Court noted other cases where Texas law enforced an arbitration clause against a non-signatory through the doctrine of “direct benefits estoppel,” which holds that a person who seeks to enforce a contract has assented to its arbitration clause as well. The Court was unpersuaded that the unilateral nature of a trust made it less of an “agreement” for purposes of the Texas Arbitration Act.

Looking at the particular claims here, the Court concluded that the beneficiary had framed his claims in terms of enforcing the terms of the trust. For that reason, bringing this lawsuit “constituted the assent required to form an enforceable agreement to arbitrate under the [Texas Arbitration Act].”

Parental termination: affidavits of voluntary relinquishment and what right a non-custodial father has to notice or to counsel

This set of petitions (filed by the mother, father, and grandmother) raise a number of issues related to parental termination, including:

• The mother argues that she did not have the mental capacity to understand the affidavit of voluntary relinquishment. Among other reasons, the petition notes that the form of affidavit used by the Department deviated from the format promoted by the State Bar.

• The father argues that he was denied personal notice of earlier hearings in the case (given only by publication) and that the trial court judge should have inquired whether he was indigent and needed appointed counsel.

An expedited oral argument date has been set for Monday June 3, 2013. This is the only case on the argument calendar between now and September.

The Texas Supreme Court did not issue any opinions or choose any new cases for review with this week’s orders list.

The Court’s calendar shows a two-day private conference of the Justices next Monday and Tuesday. Most results of that conference will be released with next Friday’s orders list.

The Texas Supreme Court issued two opinions with today’s orders list. It chose four new did not select any new cases for oral argument.¹

The Court will hear oral argument next Tuesday in IN THE INTEREST OF E.C.R., A CHILD, No. 12-0744 . This is the only case that was given an April argument date, due to the time-sensitive subject matter. Other cases in which review has been granted are waiting for argument dates in the fall.

Opinions

Texas’s Prompt Pay law does not protect hospitals in disputes against HMO network providers

CHRISTUS HEALTH GULF COAST, ET AL. v. AETNA, INC. AND AETNA HEALTH, INC., No. 11-0483

Opinion of the Court

The medical services that led to this payment dispute were accumulated beginning in the 1990s. At that time, Aetna delegated its HMO care through a third party (called “Management Services” in the opinion) that, in turn, entered contracts with each of these hospitals. Management Services hit financial troubles in 2000 and was, shortly thereafter, removed from Aetna’s system.

Ultimately, the hospitals billed $13 million that the middleman refused to pay. They then brought suit directly against Aetna under Texas’s prompt-pay law that applies to insurers.

With today’s opinion by Justice Willett, the Supreme Court holds that the statute does not apply here because there was no direct contractual privity between Aetna and the hospitals for this care. The Court’s reasoning was based on the text, as well as a subsequent amendment to the statute. The Court rejected the hospitals’ argument that the statute applied to the whole web of agreements involved in HMO care rather than requiring direct privity between two parties. The Court pointed to statutory language that payment amounts should be “in accordance with the contract between the physician or provider and the health maintenance organization.” Because there was no direct “contract between” these litigating parties, the Court held, the statute did not apply.

More interesting to appellate advocates may be the Court’s reliance on the subsequent history of the statute as an interpretative aid about what a prior Legislature had meant:

… a 2001 amendment to the Prompt Pay Statute, though inapplicable here, is instructive, and underscores Aetna’s nonliability for its delegated network’s failure to pay the Hospitals. Specifically, the Legislature in 2001 gave the Insurance Commissioner the discretionary authority to compel an HMO to “reassum[e] the functions delegated to the delegated entity, including claims payments for services previously rendered to enrollees of the health maintenance organization . . . .” Tellingly, the 2001 change provides administrative relief in situations like this, but it nowhere grants providers a private action against HMOs. It authorizes administrative intervention but not private litigation. As the Legislature is presumed to know its previous enactments, we read statutes not in a vacuum but contextually, and the implication of this 2001 amendment is significant: There would be no need for the Legislature to impose such a duty on HMOs (notably, one triggered solely by discretionary administrative action) if the pre-2001 statute already imposed that duty (actionable by private lawsuit).

The lesson for advocates is that sometimes even a Justice with no love for legislative history arguments can be moved by one. And the lesson for lobbyists is that your success in lobbying today — like reaching a compromise that could get hospitals paid in the most egregious cases with no litigation expenses — might inadvertently be creating “instructive” evidence that cuts against your clients in the future.

Reasoning from the “subsequent history” of a law is tricky because it’s guessing not what the Legislature was voting for, but what it was voting against. Commonly, people argue that a subsequent amendment confirms what an ambiguous law meant before. In that case, the Legislature is rejecting the ambiguity.

Here, the opinion reasons that by adding an administrative remedy in 2001, the Legislature confirmed that there had been no private claim before. This presumes that the Legislature’s goal was to expand relief to hospitals through this administrative process, rather than limiting litigation costs (another common legislative goal). That may be so, based on this legislative history. But it is analytically a question of legislative history and purpose — one that lobbyists and legislators should be attentive to when explaining the purpose behind these amendments.²

A no-evidence case about child support

VILMA GRANADO v. PEDRO C. MEZA, No. 11-0976

Per Curiam

When is a trial court’s award of back child support so low that there is “no evidence” to support it?

In Office of the Attorney General v. Burton, 369 S.W.3d 173 (Tex. 2012) (per curiam), the Court held that a zero-dollar award was impermissible when the record contained admissions from the father that he was at least somewhat behind on payments. As a threshold matter, the Supreme Court held that the award should be evaluated under the Court’s usual rules for no-evidence review. In Burton, that meant that the issue could be raised for the first time on appeal.

Fast forward to today. In VILMA GRANADO v. PEDRO C. MEZA, No. 11-0976 , the Supreme Court held that there was “no evidence to support the trial court’s specific finding of $500 in arrearages.”

Like Burton, this case also involved an incomplete record. In Burton, the record was missing certain Social Security information that the trial court determined was necessary to compute a precise number. Here, the record was missing some Office of the Attorney General child-support records that had (due to an office error) been frozen when the child was only six and the total obligation had still been below $500.

As the Supreme Court relates, the father here “admitted his total obligation was $11,200″ and had paid some unspecified amount. The Court said that although the OAG records reflected a total unpaid amount of $500 when the child was 6, that total was “no evidence” of the total obligation when the child turned 18.³ The Court therefore reversed and remanded to the trial court for further proceedings.

1. My mistake. By the time I wrote this post on Friday afternoon, my eyes just didn’t focus correctly on the screen. A separate post will describe the new cases. [↩]
2. Of course, not all people voting for a legislative amendment may share the same prior understanding of the law, and they may not share the same understanding as the prior Legislature that actually enacted that earlier law. But this canon of construction presumes that despite those two imperfections in the lens, the picture formed is still clear enough to tell the court something useful about the prior intent. [↩]
3. Rather than talking about this as the weight of the evidence, the Court viewed it through the lens of legal relevance and fault: “the OAG clerical error cannot serve as a basis for modifying the child-support obligation [and] is no evidence supporting the trial court’s determination.” In other words, if the OAG’s document purports to describe the obligation accrued during the wrong period of time, it cannot stand alone as sufficient proof for the right period of time. [↩]

The Court did not issue any opinions with today’s orders list.

Four of the justices are speaking at today’s Practice Before the Texas Supreme Court seminar in Austin. I’m on the menu as a lunch speaker, so please say hello if you are attending.

With today’s orders list, the Texas Supreme Court issued opinions in five cases. It did not choose any new cases for oral argument.

I’ll be writing separate posts about some of today’s bigger cases. For now, here are quick summaries:

• THE CITY OF ROUND ROCK, TEXAS AND ROUND ROCK FIRE CHIEF LARRY HODGE v. JAIME RODRIGUEZ AND ROUND ROCK FIRE FIGHTERS ASSOCIATION, No. 10-0666 : Divided 6-3, the Court holds that unionized Texas public-sector workers — unlike federal public-sector workers or unionized private-sector workers — do not have the right to have union representation during an internal investigation.

• CARLA STRICKLAND v. KATHRYN AND JEREMY MEDLEN, No. 12-0047 : In perhaps the most watched case of the term, the Texas Supreme Court holds that Texas common law does not include a claim for emotional damages for the loss of a pet. The opinion noted that the Legislature could create such a remedy, as some other states have done.

• TEXAS DEPARTMENT OF TRANSPORTATION AND CITY OF EDINBURG v. A.P.I. PIPE AND SUPPLY, L.L.C. AND PAISANO SERVICE COMPANY, INC., No. 10-1020 : The Court resolved a disputed chain of title in favor of the state as landowner. The two relevant links in the title chain were judgments: a 2003 judgment (awarding the state an easement) and a 2004 judgment in the same case (eliminating the state’s interest in favor of a private party). The Court held that later-issued judgment was void because (on this record) it was a substantive change that exceeded the proper bounds of a nunc pro tunc correction of a prior judgment.

• TRACFONE WIRELESS, INC. AND VIRGIN MOBILE USA, L.P. v. COMMISSION ON STATE EMERGENCY COMMUNICATIONS, No. 11-0473 : The Court examined the Texas statute that imposes a tax to fund the e911 system, concluding that the 1997 version of this statute was not broad enough to reach prepaid wireless plans (which had not yet been introduced in Texas). Accordingly, those prepaid wireless providers could obtain a refund of the taxes still in dispute between that time and the amendment of the statute in 2010.

• Last October, the Texas Supreme Court held in CERTIFIED EMS, INC. D/B/A CPNS STAFFING v. CHERIE POTTS, No. 11-0517 that the expert report filed in a medical-malpractice case only needed to address one valid theory for the plaintiff to move forward: “If a health care liability claim contains one viable liability theory, as evidenced by an expert report meeting the statutory requirements, the claim cannot be frivolous [and the claimant has a] right to have the entire case move forward.” (Page 10 of that slip opinion)

  Today, in TTHR LIMITED PARTNERSHIP D/B/A PRESBYTERIAN HOSPITAL OF DENTON v. CLAUDIA MORENO, INDIVIDUALLY AND AS NEXT FRIEND OF F.C., A MINOR, No. 11-0630 , the Court applies that holding. The Court examined the expert report’s sufficiency as to the theory that the hospital was vicariously liable, found that it was sufficient to meet the statute as to that theory, and remanded the case to the trial court for further proceedings.

With this week’s orders, the Texas Supreme Court issued opinions in two cases (including Justice Devine’s first signed opinion), issued a corrected judgment in a previous case, and chose two new cases for oral argument.

This week’s opinions

Takings applied to a future interest in property

EL DORADO LAND COMPANY, L.P. v. CITY OF MCKINNEY, No. 11-0834

Opinion of the Court

A landowner sold a parcel of land to the City of McKinney, with a condition attached: that if the land were used for anything other than a city park, the seller would have the right to repurchase it.

Ten years later, the city placed a public library on the land. The previous owner sued for inverse condemnation, arguing that the government’s action had deprived it of a compensable property interest, namely, the right to repurchase the land.

The court of appeals held that this condition in a deed was in the nature of a contract and, thus, that the city was immune from suit.

The Texas Supreme Court reversed, with Justice Devine writing for a unanimous court. The Court held that the case concerned a property interest rather than a mere contract right and, thus, no immunity attached.

Along the way, the Court rejected several arguments about why this particular flavor of future property interest — a “right of reentry” — should not be compensable in a taking. The Court noted that the most recent Restatement largely “dispenses with the historical parsing of future interests, recognizing only reversions and remainders. It thus abandons distinctions that previously differentiated a possibility of reverter from a right of entry because, in its view, no legal consequences attach to such distinctions.”

When an express warranty supersedes an implied warranty

NELDA GONZALES v. SOUTHWEST OLSHAN FOUNDATION REPAIR COMPANY, LLC, D/B/A OLSHAN FOUNDATION REPAIR COMPANY, No. 11-0311

Opinion of the Court

In a suit over a defective home-foundation repair, the jury found that the repair company had violated the implied warranty but had not violated the express warranty stated in the sales contract.

The court of appeals reversed, concluding that this claim was barred by limitations. In particular, it held that there was no free-standing claim here for “implied warranty” but that, instead, the theory would have to be raised under the DTPA — and thus subject to a two-year statute of limitations.

The Texas Supreme Court granted review, and now affirms (on different grounds). The Court did not, however, ultimately reach the question of whether Texas has a freestanding claim for “implied warranty” or whether it must be brought under the DTPA — an issue “over which courts have differed.” (Footnote 9 on page 5) Instead, the Court chose to first ask whether the express warranty made here superseded the implied warranty.¹

The Court held that the implied warranty “of good and workmanlike repair” applicable here is just a gap filler.² As a gap-filler warranty, it cannot be disclaimed, but it can be superseded — the parties can agree to replace the implied warranty with a custom-tailored express warranty.

Looking at the agreements here, the Court found “language [that] ‘sufficiently describes the manner, performance or quality’” of the work to supersede the implied warranty and replace it with an express warranty. Thus, the judgment could not be supported on the basis of an implied-warranty theory, whether brought as a freestanding claim or as a facet of the DTPA. The statutory question of whether implied warranty claims fall within the DTPA will be left for another day.

The more immediate lesson to counsel with warranty claims may be to handle gingerly any evidence suggesting a warranty obligation — even if not part of a signed contract. The Supreme Court did not analyze the loss of implied-warranty claims as a question of waiver; express warranties can attach — and displace the implied warranty — without the plaintiff signing anything.

Here, the trial court viewed this unsigned document as a problem and decided to admit it for a limited purpose — just to show “what in [the defendant's] opinion the company was supposed to do.” (Discussion at pages 8.) Yet on appeal, the Supreme Court looked to the terms of this document as part of its analysis of whether the express warranty superseded the implied warranty. The Court explained that, even unsigned, the disputed document “could fairly be characterized as an obligation of [the defendant] to [the plaintiff].” Accordingly, the document’s broad language could weigh in favor of the express warranty superseding the implied warranty.

Correction of a judgment that had reversed some unchallenged parts of a trial court’s decision

In WENDELL REEDER v. WOOD COUNTY ENERGY, LLC; WOOD COUNTY OIL & GAS, LTD.; NELSON OPERATING..., No. 10-0887 , the Court issued a short supplemental opinion explaining that it was modifyings its previous judgment. In August 2012, the Court had reversed and “render[ed] a take-nothing judgment.” As this week’s opinion (PDF) explains, that language was too broad because there were some parts of the trial court’s judgment that had not been challenged in the scope of the appeal. The Supreme Court thus issued a corrected judgment, specifying the issues on which it was reversing the trial court.

Two New Grants

• GENE E. PHILLIPS, INDIVIDUALLY AND D/B/A PHILLIPS OIL INTERESTS, LLC, ET AL. v. CARLTON ENERGY GROUP, LLC, No. 12-0255 : The petition argues that damages measured by lost “market value” must be held to the same evidentiary standards as damages for “lost profits.” An amicus letter from the Texas Civil Justice League urges the Court to take the petition to overrule Castleberry v. Branscum, 721 S.W.2d 270 (Tex. 1986), a decision about piercing the corporate veil.

• MAN ENGINES & COMPONENTS, INC. AND MAN NUTZFAHRZEUGE AKTIENGESELLSCHAFT v. DOUG SHOWS, No. 12-0490 : The petition argues that the implied warranty of merchantability cannot be invoked by subsequent purchasers of (used) goods.

1. The Court had its choice of which sub-issue to address first. Had it started with the question of whether the DTPA controlled, then it might never have needed to reach this question about when express warranties supersede implied warranties. [↩]
2. The Court also held that a general “no evidence” objection at the charge conference was sufficient to preserve this question of whether an implied warranty existed under Texas law. [↩]

The Texas Supreme Court did not issue any opinions or choose any new cases for review with this week’s orders list.

The Court’s public calendar shows a conference of the Justices on Tuesday, March 26th.

With this week’s orders list, the Texas Supreme Court issued one opinion.

What counts as a notice of appeal?

IN THE INTEREST OF J.M. AND Z.M., MINOR CHILDREN, No. 12-0836

Per Curiam

The question before the Court was whether a document filed in the trial court qualified as a “notice of appeal” to trigger appellate jurisdiction before the clock expired.

The wrinkle is that the document claimed to be a combination of a motion for new trial and notice of appeal. Under Texas practice, these are usually separate documents, with the notice of appeal filed after any motion for new trial is disposed.

But the Texas Supreme Court held that this was sufficient because — based on the title of the document and language indicating that the party “wishes to appeal this case” — it was “a bona fide attempt to invoke appellate jurisdiction.”

The Texas Supreme Court did not issue any opinions with today’s orders list.

The Court calendar shows a private conference scheduled for next Monday and Tuesday. The Court’s final scheduled argument sitting for the term will begin on February 26, 2013.

With the first orders list of February, the Texas Supreme Court issued one opinion. It also chose to grant rehearing in two (consolidated) petitions it had previously denied, instead setting them for oral argument later this month.

DIEGO RODRIGUEZ-ESCOBAR, M.D. v. MICHAEL ALLEN GOSS, STEVEN GOSS, AND TIMOTHY LEE GOSS, INDIVIDUALLY AND AS REPRESENTATIVE OF THE ESTATE OF BEVERLY GOSS, No. 10-0511

Per Curiam

This claim was brought by the family of someone who had been evaluated for possible involuntary hospitalization for psychiatric care as a suicide risk. The physician determined that she did not meet the test for involuntary commitment. Three days after her release, she committed suicide. The trial court entered judgment that the doctor had been negligent, awarding $200,000 in damages.

Read more about this and the new case set for argument

The Texas Supreme Court issued opinions in six cases with last Friday’s orders list.

Opinions in Argued Cases

THE STATE OF TEXAS v. NINETY THOUSAND TWO HUNDRED THIRTY-FIVE DOLLARS AND NO CENTS IN UNITED STATES CURRENCY ($90,235) AND 2000 BLACK LINCOLN NAVIGATOR VIN: 5LMPU28A7YLJ10865, No. 11-0642

Opinion of the Court

Although the subject matter of the case is forfeiture of property suspected of being involved in criminal activity, the appeal came down to a question of summary-judgment procedure.

The property’s owner moved for a traditional summary judgment, arguing (in part) that the police officer who seized the property did not have a reasonable basis to believe it had been used in criminal activity. In support of that summary judgment, he offered his own affidavit denying that the officer had a reasonable basis.

The Court held that this was not enough to prevail on summary judgment, where the question was the other person’s state of mind:

[Read more →]

With this week’s orders list, the Texas Supreme Court chose two (related) petitions for oral argument. The Court did not issue any opinions with these orders.

Petitions Granted

The Court granted review two tax petitions that ask whether it was proper for a government contractor to claim a “sale for resale” exemption on certain goods it purchased to fulfill a government contract. The Comptroller argues that, because the overall contract was for a “non-taxable service,” this exemption did not apply.

The cases are:

SUSAN COMBS, COMPTROLLER OF PUBLIC ACCOUNTS AND GREG ABBOTT, ATTORNEY GENERAL v. HEALTH CARE SERVICE CORPORATION, No. 11-0283 , and

SUSAN COMBS, COMPTROLLER OF PUBLIC ACCOUNTS OF THE STATE OF TEXAS AND GREG ABBOTT, ATTORNEY GENERAL OF THE STATE OF TEXAS v. HEALTH CARE SERVICES CORPORATION, No. 11-0652 .

The two have been consolidated for purposes of oral argument, which is scheduled for February 27, 2013.