All three of these were chosen for argument with last week’s orders (blog post):

• The Court chose an argument date for In re Stephanie Lee, No. 11-0732: February 28, 2012.

• It granted a motion to “reset” the argument in Combs v. Roark Amusement and Vending, L.P., No. 11-0261 (the case about arcade claw machines). It had been scheduled for February 28, 2012. No new date has been assigned.

• And — for the second in the past two months — it denied a party’s request to reschedule oral argument. Without comment, the orders list notes that a request was filed in In re the Office of the Attorney General, No. 11-0255. It remains set for oral argument on February 27, 2012. (A similar request was denied on December 22, 2011 in Ashford Partners, Ltd. v. Eco Resources, Inc., No. 10-0615. On that orders list, Justice Guzman noted her dissent to the denial of the motion.)

In at least one regard, U.S. Supreme Court advocates have it easy. They know about the grant of review before the merits briefs are even filed, so they can block out preparation time — many go to the elaborate ends of participating in outside moot courts.

In the Texas Supreme Court, by contrast, there can be just a few weeks between the grant of review and the oral argument date. The lawyers in the four cases mentioned above were originally given about four weeks notice of the argument date.

With two of these motions being denied in recent months, I’m curious to know what reasons for rescheduling the Court is finding persuasive — and unpersuasive.

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.

Opinions

Do the findings of a city nuisance panel foreclose a takings claim in court? No, but the suit must be brought promptly.

Today the Court denied rehearing in City of Dallas v. Stewart, No. 09-0257, in which it had held that a citizen whose property was taken by a city administrative body should be able to challenge that finding in court.

A number of cities and government groups had filed amicus briefs, arguing that the new rule was unworkable. Justice Guzman noted many of those critics in her opinion today dissenting from the denial of rehearing (opinion).

Chief Justice Jefferson also reworked his five-vote majority opinion, adding a new section to respond to those critics. He noted how rare it is for property owners to file these suits for judicial review, both because of the short time window available and because the property owner bears the risk of paying the city’s legal costs if it loses.

In a related case, the Court today resolved Patel v. Everman, No. 09-0506 by per curiam opinion. In that case, the property owner had filed a suit for judicial review — but then non-suited it. Later, he filed a separate suit to challenge the taking. The Court rejected this as an attempt to circumvent the time limits: “Patel cannot attack collaterally what he declined to challenge directly.”

Workers Comp coverage extends to temporary workers, even if neither the employer nor the insurance carrier intend it to do so

Port Elevator-Brownsville, L.L.C. v. Rogelio Casados and Rafaela Casados, No. 10-0523 (Guzman, J.)

Casados was a temporary worker who was killed on the job. Port Elevator (the company that had hired him through the temp agency) did have workers compensation coverage, although it had not separately paid to cover its temporary workers. Its workers comp carrier (Texas Mutual) also denied coverage to Casados.

When Casados filed a lawsuit, Port Elevator invoked the workers-comp bar as a defense. Today’s opinion for a unanimous Texas Supreme Court holds that his lawsuit was barred by the Texas Workers Compensation statute because Port Elevator had obtained coverage for at least part of its workforce.

The key to the Court’s reasoning was its conclusion that Texas law did not permit an employer to “split” its workforce with regard to workers comp. Either all the workers are covered, or none are covered. For this reason, the Court concluded that it did not matter if Texas Mutual had actually charged or collected a premium for temporary workers — they were covered the same as full employees.

Here, Casados offered several reasons why the Court should, in its words, “adopt an additional, intent-based exception to the rule against splitting workforces.” That framing sounds a little ominous. Really, the Court is asking if the statute restricts the freedom of contract by carriers and employers to choose a narrower range of coverage. The Court’s holding is, yes, it does. Whether the parties wanted narrower coverage is irrelevant; the statute makes coverage all or nothing.

In this case, that’s very bad for Casados — perhaps doubly so because his workers comp claim has already been denied. In the longer term, this holding may cut both ways for employers. A bar to suit is nice, but firms that employ a significant number of temporary workers may see higher premiums to compensate.

How does supersedeas apply to the decisions of state licensing bodies?

In re Carl Bass, Patricia Grutzmacher, and Thomas Bauer, No. 11-0245

We don’t know the answer to that question just yet. But the Texas Supreme Court is showing some interest in it, today ordering that a trial court provide more detail about its reasoning.

A state board suspended the license of three accountants. They sued to invalidate those suspensions under the Open Meetings Act. The district court agreed with them on the merits of that claim — but allowed the state to supersede that judgment pending appeal without posting any sort of security (which had the practical effect of reinstating the suspensions).

The accountants argued that Texas Rule of Appellate Procedure 24.2(a)(3) should give the trial court discretion to deny supersedeas, even when a state agency is involved that normally does not have to post a bond. The district court and court of appeals rejected that argument.

With today’s order, the Texas Supreme Court paused its own proceedings to ask the trial court to formally state its conclusions of law and findings of fact.

The State is urging an absolute rule that it can supersede all judgments, regardless of trial court discretion.

The order by the Texas Supreme Court asks the trial court to state whether that is the principle on which it ruled for the State, or whether it did so under its general discretion over supersedeas. If the former, then the case presents a pure question of law. If the latter, then t is a much more challenging mandamus.

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 Court’s next internal conference begins January 23rd.

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.

There was something interesting in that last list. The Court resolved two motions asking it to re-set an oral argument date. In one, it granted the motion. In the other, it denied the motion.

In Ashford Partners, Ltd. v. Eco Resources, Inc., No. 10-0615, the Court denied a motion by the Respondents to move the argument date from February 8, 2011. The order list does not explain in more detail, but it does note that Justices Medina and Guzman “would grant the motion to reset oral argument”. There was at least some contention within the Court about how to proceed.

I haven’t seen a copy of the motion in Ashford Partners, but I’m curious what grounds were advanced.

Meanwhile, in In re E.R., No. 11-0282, the Court granted a request to move the argument date to February 28, 2012. The argument had originally been scheduled for February 9, 2012 — the Court’s sitting in the courtroom at the University of Texas school of law.

According to the Court’s online calendar, next Friday will bring the last regular orders list of 2011.

It did grant one motion for divided argument by a private amicus curiae (in Oncor Electric Delivery Company LLC v. Dallas Area Rapid Transit and Fort Worth Transportation Authority, No. 11-0079, to be argued on January 11, 2011) and granted a motion to dismiss in In re Ascension Martinez, Jr., No. 11-0007, which asked when it was proper to require a defendant to disclose net-worth information. That case would have been argued December 7th.

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.