Supreme Court of Texas Blog: Legal Issues Before the Texas Supreme Court
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A quiet orders list [Oct. 10, 2014]

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With its orders list this week, the Texas Supreme Court did not grant review in any new cases or issue any opinions.

The Court traveled to […]

With its orders list this week, the Texas Supreme Court did not grant review in any new cases or issue any opinions.

The Court traveled to Texas Tech University on Thursday to hear oral arguments in two cases:

UNIVERSITY OF TEXAS AT ARLINGTON v. SANDRA WILLIAMS AND STEVE WILLIAMS, No. 13-0338

Heard at oral argument on October 9, 2014

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The courtroom facility at Texas Tech is very modern and wired for video cameras, and the arguments are now available on the State Bar’s oral argument page. The camera perspective is a little different — more of a jury’s-eye view of the room, which makes sense for a teaching courtroom.

See also: “Texas Supreme Court justices hear seatbelt evidence, sports injury cases at Tech law”

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School finance litigation returns to the Texas Supreme Court

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It’s now up to the Texas Supreme Court to decide whether to give its own guidance to the Texas Legislature about funding local school districts […]

It’s now up to the Texas Supreme Court to decide whether to give its own guidance to the Texas Legislature about funding local school districts or to leave in place the district court’s judgment striking the system down.

School finance litigation returns to SCOTX
The most current summary describes this event:

The AG's office filed its notice of appeal in the latest round of school-finance litigation. As expected, this notice was filed as a direct appeal to the Texas Supreme Court, bypassing the intermediate level of review. A group of school districts has also filed its own notice of appeal.

This kind of direct appeal is permitted in certain narrow circumstances, a process I've written about before. The previous round of litigation in 2005, West Orange Cove II was also a direct appeal. West Orange Cove I, however, took the more usual route through the intermediate courts.

The next step is for the parties to formally ask the Texas Supreme Court to accept jurisdiction. Mirroring the process for direct appeals in the U.S. Supreme Court, this is done through filing a Jurisdictional Statement that stands in place of a petition for review. If the Court wishes to review the case, it will do so by 'noting jurisdiction' and setting the case for full briefing and future argument.

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One new opinion, one revised opinion, and six grants [Oct. 3, 2014]

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With this week’s orders list, the Texas Supreme Court issued one new opinion, revised one of its opinions from June, and chose six new cases […]

With this week’s orders list, the Texas Supreme Court issued one new opinion, revised one of its opinions from June, and chose six new cases for argument this fall.

The court of appeals can look beyond a recital in the judgment when evaluating a restricted appeal

A party who does not participate in the trial court hearing that leads to the judgment being challenged can file a notice of restricted appeal for up to six months after judgment, as compared to the normal 30-day notice of appeal deadline. The wrinkle here is that the judgment recited that the party had appeared at the key hearing — while other aspects of the trial court record indicated that she had not.

The underlying dispute involves child custody. About two years after a divorce, the father moved to modify the court's custody order to appoint him sole managing conservator. A hearing was set for September 2011, and while the father appeared by telephone, the mother did not. The trial court did not enter an order until November 2011. That order, in turn, began with recitals stating that the hearing occurred in November 2011 and that the mother appeared.

The Supreme Court held that the court of appeals was not bound by the recital on the face of the judgment and, instead, should have considered the other indications in the record that — here, at least — conclusively established that the relevant hearing was the one that took place in September 2011.

The Court emphasized that this record was truly overwhelming:

Importantly, nothing in the record indicates the hearing took place in November 2011. And at least eight references in the record, including portions of the trial court’s docket sheet and the reporter’s record, conclusively confirm the hearing occurred in September 2011 and the petitioner did not participate.

When the record is less conclusive, a party may have a much more difficult time trying to challenge an incorrect recital in a judgment that threatens to deprive the appellate courts of jurisdiction.

Slight revision to the Ford v. Castillo opinion

The Court revised its opinion in FORD MOTOR COMPANY v. EZEQUIEL CASTILLO, INDIVIDUALLY, MARIA DE LOS ANGELES CASTILLO..., No. 13-0158 , the fraud case growing out of a note sent by a juror asking about the amount of damages, inducing a quick settlement. (See previous post.)

The new opinion addresses at least two issues noted in the rehearing motion. First, it rejected the argument that Ford’s reliance on the note was unreasonable because juries can send notes about damages without having yet resolved the merits. The original opinion had not addressed this argument. On rehearing, the Court explained that, given the context here and the text of the note itself, the evidence was legally sufficient on this element.

Second, the Court remanded on the issue of factual sufficiency. The court of appeals had not reached that issue, and the court’s original opinion did not address it. On rehearing, the petition urged that the Court remand to the court of appeals so that it could consider the factual sufficiency challenge.

To accomplish that, the Court granted rehearing, issued this new opinion replacing its previous one, and remanded to the court of appeals.

Grants

This orders list includes six grants and twenty denials of review for petitions that had been fully briefed on the merits.

These are the six grants:

Expert testimony about causation

This petition challenges a jury verdict that certain chemicals caused a fire within a facility storing many other chemicals, on the basis that (1) the expert's opinions were not supported by a sufficient foundation and (2) the evidence was legally insufficient.

Among the issues identified in the petition:

  • that it "credits expert testimony that damages are 'consistent with' a particular
    causation theory rather than requiring probative evidence of causation"

  • that it includes "proof of causation by process of elimination"

  • that they expert testimony was admitted without "requiring each part of the causation theory to be supported by testing or other scientifically reliable evidence"

  • that it "[d]isregards undisputed test results conducted by a defendant’s experts that
    disprove a plaintiff’s theory"

JAW THE POINTE, LLC v. LEXINGTON INSURANCE COMPANY, No. 13-0711

Set to be argued on January 13, 2015
Whether a misrepresentation in a babysitting flyer is a "substantial cause" of an eventual sexual abuse

The family of a child who was abused by a babysitter brought this claim against the babysitter's mother, who had made a misleading flyer about his trustworthiness as a babysitter, and the church that distributed that flyer. The allegation is that he was "troubled" with known psychiatric issues and that on the second babysitting session, he sexually abused two young boys. The jury found the defendants liable.

The court of appeals reversed and rendered, concluding that the evidence of causation presented here was legally insufficient based on Doe v. Boys Club of Dallas, also a sexual abuse case. In Boys Club, the Court held that the chain of causation had been essentially broken by other links between the abuser and the victim's family, such that the original lies were no longer a "substantial factor" causing the injury.

The petition asks the Court to hold that Boys Club was not meant to be a blanket protection for those whose misrepresentations might be linked to sexual abuse. The respondents argue that the sexual abuse was not the "natural and probable" result of the misrepresentation because the conduct was so extraordinary that it broke the chain of causation.

When does post-judgment interest start to accrue?

WAYNE VENTLING v. PATRICIA M. JOHNSON, No. 14-0095

Set to be argued on January 13, 2015

In a quite long-running case, the dispute here is how to determine the start date for post-judgment interest when the original judgment goes up on appeal and is partially changed on remand.

The petition contends that the interest should be computed beginning in 2012. It argues that the original 1998 judgment was not itself final — that it was an interlocutory order not itself appealed to the court of appeals. It also argues that the substantive nature of the remand (involving the introduction of new evidence, some by the plaintiff) warranted treating the 2012 award as the starting point for computing interest.

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A day for certified questions [Sep. 26, 2014]

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It was a Fifth Circuit-focused day on the Texas Supreme Court orders list. The Court accepted one new certified question and scheduled another for […]

It was a Fifth Circuit-focused day on the Texas Supreme Court orders list. The Court accepted one new certified question and scheduled another for oral argument.

Request denied for additional argument time

The other order of interest to practitioners might be the Court’s refusal to allow additional time for oral argument in KCM FINANCIAL LLC, R.J. SIKES, ROGER SIKES... v. BETTY LOU BRADSHAW, No. 13-0199 . The parties jointly made the request, suggesting that the facts suggested more than two “sides” and that each petitioner’s counsel thus needed 20 minutes of his own. (motion PDF). The Court decided, instead, to leave the parties with the original 20 minutes per side.

We don’t know how the Court would have reacted to a request for a more modest quantity of additional time, but this denial is a good point of reference the next time a client asks why you are not requesting more time for their case.

Issue Summaries

The Kroger case is set for argument on Dec. 9, 2014. As soon as the Court’s docket page notes that among the calendar entries, the case-status box below should also reflect it.

Does common language in a CGL policy have an ambiguity about coverage for product defects?

U.S. METALS, INCORPORATED v. LIBERTY MUTUAL GROUP, INCORPORATED, DOING BUSINESS AS LIBERTY INSURANCE CORPORATION, No. 14-0753

Chosen for future argument by order issued September 26, 2014

This suit grows from an unsatisfied customer of US Metals. Exxon bought and installed 350 pieces of drilling equipment (well neck flanges) but then later determined that they were the source of some problems, requiring the equipment — which had been installed by being welded in among other heavy equipment — to be removed at substantial cost, both in terms of raw expense and lost production during the time that the wells were not operating.

US Metals held a commercial general liability insurance policy that protected it against claims for "property damage" and "bodily injury."

But US Metals's insurer refused to cover the defense of this claim, citing certain exclusions related to damage caused by deficiencies related to "your [the insured's] product", as well as certain types of damage claims for "impaired property."

The Fifth Circuit has now asked the Texas Supreme Court to address, as a question of Texas law, whether two of the pivotal terms in the contract language defining this exclusion ("physical injury" and "replacement") are ambiguous and, if not, what they mean under Texas insurance law.

In making this request, the Fifth Circuit emphasized its view that this was a question of potentially broad importance:

The Texas Supreme Court’s interpretation of these terms will have far-reaching implications due to the commonality of these exclusions within CGL policies. As such, the answer to our certified questions will affect a large number of litigants. No Texas court or any other state or circuit court has determined whether the terms "physical injury" or "replacement" found within the "your property" and "impaired property" exclusions are ambiguous.

This legal point will now be briefed in the Texas Supreme Court, and the case will most likely be heard at oral argument next spring. You can read more details in the Fifth Circuit's opinion certifying the question.

What duty does an employer owe to an employee regarding a premises defect?

RANDY AUSTIN v. KROGER TEXAS, L.P., No. 14-0216

Set to be argued on December 9, 2014

This is a slip-and-fall case with a twist: The injured person was an employee who was cleaning up the spill:

Kroger's Safety Handbook provided that store management should "make certain that the Spill Magic Spill Response Stations [were] adequately supplied at all times" and available in numerous places throughout the store. Spill Magic allows an employee to clean a liquid spill with a broom and dustpan, and — according to Kroger's Safety Handbook — reduces the likelihood of a slip-and-fall by 25 percent. Because there was no Spill Magic on premises that day, Austin cleaned the spill with a dry mop instead. When Austin moved on to the men's restroom, he saw that the same substance covered about 80 percent of the floor. Austin placed "Wet Floor" signs inside and outside of the room, and proceeded to mop the spill for about thirty to thirty-five minutes. Austin took "baby steps" in and out of the restroom to change out the mop head numerous times, and successfully removed about thirty to forty percent of the liquid.

At about 10:30 a.m., while continuing to remedy the spill, Austin fell. He sustained a left femur fracture and severely dislocated his hip. He spent nine months in the hospital and underwent six surgeries, and his left leg is now two inches shorter than his right.

The employer did not subscribe to the Texas Workers Compensation system, so the claim falls through to common law.

The federal court decided that at least part of the case — a conventional negligence theory based on failure to provide the employee with "a necessary instrumentality" (the Spill Magic) — should be remanded to the federal district court for further proceedings. What it did not know was whether the premises liability theory was also viable — or whether that theory is precluded under Texas law.

So, it has certified the question:

Pursuant to Texas law, including §406.033(a)(1)–(3) of the Texas Labor Code, can an employee recover against a non-subscribing employer for an injury caused by a premises defect of which he was fully aware but that his job duties required him to remedy? Put differently, does the employee’s awareness of the defect eliminate the employer’s duty to maintain a safe workplace?

The Fifth Circuit detailed its analysis of the underlying "tension" within these branches of Texas tort law in its opinion certifying the questions.

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No opinions or grants [Sep. 19, 2014]

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The Texas Supreme Court issued a quiet orders list today, with no opinions or new cases chosen for oral argument.

The Court’s next internal conference is […]

The Texas Supreme Court issued a quiet orders list today, with no opinions or new cases chosen for oral argument.

The Court’s next internal conference is scheduled to begin September 30, and its next oral arguments will be on October 9 (to be held at Texas Tech University).

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What’s on the SCOTX argument calendar for September?

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Previews of the September oral argument calendar

This week brings the Texas Supreme Court’s first full argument sitting since late February. The Court will hear seven cases, spread across September 16, 17, and 18.

Amending a petition after a 101.106 motion is filed

This petition asks one question: "Where a plaintiff’s initial petition asserts only tort claims against a governmental unit and its employees, and the unit moves to dismiss the employees under section 101.106(e), must a trial court grant the motion to dismiss even if the plaintiff amended her pleading to drop the tort claims and add other claims before the court rules on the motion?"

Here, after a state entity moved to dismiss tort claims brought against it and an employee, the plaintiff amended to add federal Section 1983 claims. The state argues that this amendment was improper (and the whole case must be dismissed) because it had filed a Section 101.106 dismissal motion prior ot the amendment.

The Court originally denied the petition for review in April 2013, but it granted rehearing in October 2013, reinstating the case to the docket and requesting full merits briefing. It granted the case for oral argument in June 2014.

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

IN RE DEEPWATER HORIZON, No. 13-0670

Set to be argued on September 16, 2014

This case reaches the Texas Supreme Court by certified question from the U.S. Fifth Circuit in New Orleans.

In this branch of the litigation arising from the 2010 Deepwater Horizon drilling rig explosion, the question is not how much is paid out but which entity will ultimately bear the cost.

BP contracted with Transocean to provide "additional insured" protection covering Transocean's operations above the water line, while BP engaged in drilling below the water line. That narrow limitation was contained in the business contracts between the entities, while the insurance contracts themselves (arguably, at least) did not mirror the same limitation.

The first major issue is about construing the various contracts. BP contends that only the insurance policy language matters in deciding whether it is an "additional insured," citing cases such as EVANSTON INSURANCE COMPANY v. ATOFINA PETROCHEMICALS, INC., No. 03-0647. The insurers contend that the extent of coverage they agreed to provide to BP was limited to the scope of Transocean's agreement to provide that coverage, and thus excludes the claims here.

The second major issue might have broader implications. BP contends that if there is any ambiguity about whether it is covered, the policy should be construed against the insurer and in favor of the insured. The insurers contend that the doctrine does not apply in this sophisticated commercial context.

When the State condemns land containing a billboard, what compensation is due?

STATE OF TEXAS v. CLEAR CHANNEL OUTDOOR, INC., No. 13-0053

Set to be argued on September 17, 2014

In this case, 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 away from the property being condemned.

Previously:
Fraud in mineral leases

A mineral owner sued the operator for fraud that occurred more than four years before suit, the effects of which continued in the stream of payments to the current day. The operator responded with, among other arguments, a limitations defense. The mineral owner contended that the discovery rule should have tolled that limitations period because it reasonably relied on the operator's representations. The operator contends that any such reliance was unreasonable because Railroad Commission records contained the needed information.

The petitioners present four issues:

  • Should limitations have been tolled here? In part, this asks whether the special legal duties that an operator owes to the mineral owner make the owner's reliance on these statements more reasonable.

  • Did the court of appeals err in reversing and rendering judgment on the breach of contract claim? In part, this issue asks whether a defendant can obtain rendition on such a claim without having moved for summary judgment.

  • Even if the statute of limitations applies, does it only bar recovery for the oldest payments made under these contracts or does limitations also bar recovery for new payments so long as the alleged misconduct was more than four years in the past?

  • Was there any basis to refuse attorneys fees here given the parties' stipulations on that point?

The respondents challenge some other aspects of the judgment, including whether there was sufficient evidence that the parties agreed to a higher rate of post-judgment interest (here, 18% rather than the 5% that would have otherwise applied).

The latest:
Previously:
  • Three opinions, one grant (June 16, 2014)
  • Construing an insurance policy that covers multiple properties hit by a single hurricane

    RSUI INDEMNITY COMPANY v. THE LYND COMPANY, No. 13-0080

    Set to be argued on September 18, 2014

    The insured suffered losses across a number of properties during Hurricane Rita. This petition concerns how to determine the insurers' maximum liability. Is it limited to the "scheduled" value of each property under the policy, taken separately? Or do other provisions in the policy allow the insured to recover the full value of those properties, staying within other limits of the policy?

    The insurer contends that the policy, as a whole, should be read as a "scheduled" policy and thus construed in line with a national body of law that would limit its liability here. The petition accuses the court of appeals of coming up with what it labels a "hybrid" policy that would lead to absurd results.

    The property owner contends that the court of appeals properly construed the actual policy language agreed here, and that this policy language — not a label like "scheduled" or "hybrid" policy — is what should control the outcome.

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

    Previously:
  • Three petitions granted (February 16, 2014)
  • Three opinions, one grant (June 16, 2014)
  • Unresolved questions about Section 51.003

    PLAINSCAPITAL BANK v. WILLIAM MARTIN, No. 13-0337

    Set to be argued on September 18, 2014

    Having recently issued an opinion about lender's rights of offset under Section 51.003 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.

    This petition 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.

    Previously:
  • Three opinions, one grant (June 16, 2014)
  • When does city code enforcement raise a takings issue?

    CITY OF HOUSTON v. JAMES & ELIZABETH CARLSON, ET AL., No. 13-0435

    Set to be argued on September 18, 2014

    The City of Houston ordered the owners of a condominium to vacate until they repaired the units to meet city code. In a separate suit, the City was found to have violated the owners' due process rights. In this suit, the owners sued the City for a regulatory taking. The court of appeals agreed that the property owners had a valid claim that could proceed.

    The City presents two issues:

    1. Can an invalid order to vacate a condominium be a taking, even without some actual damage or use of the property in question?

    2. Does the order in this case represent the kind of "public use" that constitute a taking or is it instead what the City calls "a nonpublic, noncompensatory use of a governmental entity’s police powers"?

    Previously:

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    Catching up on recent (quiet) summer orders lists

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    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 […]

    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.

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    The economic loss rule in Texas is more restrictive than the Restatement

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    LAN/STV, A JOINT VENTURE OF LOCKWOOD, ANDREWS & NEWMAN, INC. AND STV INCORPORATED v. MARTIN K. EBY CONSTRUCTION COMPANY, INC., No. 11-0810

    […]

    An architect on a commercial project was sued by a contractor on the project for their negligent work, which allegedly caused significant increased costs that the contractor could not recoup.

    The key fact here turns out to be that the architect worked for the project owner, not the contractor. For that reason, the architect argued, Texas law does not permit the contractor to sue it for pure economic losses (those unconnected to some bodily harm or property damage) caused by its allegedly negligent work. The principle involved is the “economic loss rule.”

    As the opinion explains, the economic loss rule aims to draw a clearer line to the edges of tort liability than offered by older principles such as “foreseeability.” While foreseeability can turn on idiosyncratic facts, the economic loss rule instead invites a court to announce broad policy determinations about whether tort liability should apply in a particular situation.

    The Texas Supreme Court ultimately agreed with the architect and held that the architect had no liability for these economic losses suffered by a contractor relying on its plans. What makes this opinion notable — and ensures it will be frequently cited, despite its narrow holding — is the depth of its examination of the policies and principles behind the economic loss rule, both in terms of Texas law and the larger national academic discussion.

    That extensive background sets the stage for the Court to announce a rule at odds with the Restatement. Some commentary in the Restatement addresses just this situation — an architect, whose plans inflict economic loss on others in the project. The Restatement suggests that an architect on a commercial project should expect exactly this degree of reliance from contractors bidding on the project and, thus, that it is appropriate to impose tort liability as the default rule and let the parties choose, if they wish, to modify that by contract.

    A unanimous Texas Supreme Court disagreed. It viewed the policies behind the economic loss rule as better served by leaving this kind of liability among people engaged in the same economic transaction exclusively to the realm of contract law: “We think it more probable that a contractor will assume it must look to its agreement with the owner for damages if the project is not as represented or for any other breach. Though there remains the possibility that a contractor may not do so, we think the availability of contractual remedies must preclude tort recovery in the situation generally because … ‘clarity allows parties to do business on a surer footing’.”

    To explain its thinking, the Court offered an excerpt from a 1992 law review article by Professor William Powers, an extensive block quote that may soon be a favorite example for those defending the practical value of the legal academy.1

    The Court’s precise holding turns out to be narrow: That a general contractor cannot recover pure economic losses from an architect hired by the project’s owner. The implications for future contractors are clear enough: negotiate for contractual or insurance-based protection.

    1. This opinion extensively discusses academic publications by Professor Powers, Professor Fleming James, and Judge Posner, among others. []

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