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.

Opinions

Minority shareholder oppression is limited to what the statute provides, not common-law remedies

Separate post about this case still to come

The economic loss rule protects an architect sued for negligence

Arbitration agreement’s limitations on choice of arbitrator

The arbitration aspects of this case are summarized on the Disputing blog post “Texas Supreme Court Overturns $26 Million Arbitral Award Over Improper Arbitrator Disqualification”.

The contract with this arbitration clause was signed several years ago, at a time when it was common to have an arbitration panel of three members, two of whom would be selected by the parties (and expected to be partial) who would then pick a neutral, third arbitrator. Since then, the AAA has changed its rules to provide that all three arbitrators should be impartial.

Applying those new rules, the AAA disqualified the first arbitrator nominated by one of the parties. Eventually, a panel of three impartial arbitrators was selected, consistent with the new version of the AAA rules. When that panel came back with an unfavorable award, the party moved to vacate it on the ground that it was inconsistent with the parties’ agreement.

The Texas Supreme Court split 5-4 over the propriety of vacating the award. The majority held that the award should be vacated because the parties’ agreement should control over the AAA rules. It held that, by specifying other characteristics (“knowledgeable” and “independent”), the parties meant to speak comprehensively and thus the agreement was “not in need of gap-filling from the AAA rules.” Thus, the arbitration procedure followed was not the one agreed.

The dissent argued that, if the parties had meant to freeze the AAA rules at a specific moment in time, they could have specified that. Instead, the AAA rules provide that each arbitration is governed by the rules in effect when arbitration is commenced, not when the agreement was signed. The dissent would have held that the new provisions in the AAA rules could be harmonized with the parties’ agreement and thus would have upheld the award.

Does Texas law or federal maritime law govern social host liability for a drunk driver?

The first paragraph sums this unusual case up:

Under Texas law, a social host has no duty to prevent someone from drinking and driving. But in this case, the driver became intoxicated on a small, chartered fishing boat during a business retreat, and plaintiffs contend that their action against the host is governed by federal maritime law, which, they argue, would recognize liability. For maritime law to apply, the action must fall within admiralty jurisdiction, and under the tests prescribed by the United States Supreme Court in Jerome B. Grubart, Inc. v. Great Lakes Dredge & Dock Co., it does not.

The Court examined whether the activity in question (drinking by guests on a small fishing boat) “posed [no] more than a fanciful risk to commercial shipping.” Nor did the Court view this as a traditional maritime activity that warrants the uniformity of a federal maritime law to avoid inconsistent state laws. Instead, it suggested, applying maritime law here might have the opposite effect by drawing “a distinction between [proper social host culpability for] business retreats at hunting lodges and those at fishing lodges when in fact there is none.”

The effect of pooled mineral rights on rights to access the surface

The owner of a surface tract wanted to stop trucks from using a road across that property to
operate wells on a neighbor’s property. The one fact that the Texas Supreme Court holds to be
dispositive is that the mineral rights underneath that property had been pooled with the
mineral rights that were being drilled underneath a neighbor’s property.

The Court observed that “the ‘primary legal consequence’ of pooling” is “that production anywhere
on a pooled unit is treated as production on every tract in the unit.” From that basis, the Court
concluded that, just as a mineral rights owner would have an implied easement to access the surface
of a single piece of property to drill beneath it, it would have access to the entire surface
over the entire pooled mineral interest to drill anywhere within that unit.

Workers compensation death benefits

The Fifth Circuit certified this statutory interpretation question about workers compensation
death benefits. By statute, the carrier has a subrogation interest to recover the amounts it had previously expended, as well as to treat the amounts recovered as a sort of advance against the
carrier’s future payment obligation. The question here is how that future payment obligation obligation
is affected when there are multiple beneficiaries, who receive different fractions of the settlement, and to whom very different future payment streams are owed.

Here, the settlement involved a surviving spouse (who had remarried and thus would not receive any future payments) and the surviving children (who have a right to future payments). The settlment proceeds were apportioned by the district court with the largest share (about $350,000) going to the spouse and a smaller share (about $80,000) to the children.

The specific question is when the carrier’s obligation to resume making payments to the children kicks in — is it when the benefits would have equalled $80,000 or can the carrier wait until the sum of those payments would have equalled the total of all benefits ($430,000). In other words, is this “statutory right to treat a third-party recovery as an advance against future benefits … determined on a beneficiary-by-beneficiary basis or a collective-recovery basis”?

The Court held the latter, that the carrier’s subrogation interest here was on a collective-recovery
basis for a particular “claimant,” which the Court viewed as covering the employee and all of his
or her beneficiaries, collectively. So, here, the carrier can decline to make payments to the
surviving children until those payments would exceed total the entire, collective recovery.

The Court noted, however, that its reasoning would not extend to two employees injured in the same accident that settled a joint lawsuit. In that situation, each of the employee’s (and their respective families) would be a distinct “claimant” whose recovery would not affect the carrier’s obligation to the other.

Proving fraud by circumstantial evidence

You might remember Ford Motor Company v. Ezequiel Castillo, et al., No. 06-0875 , or at least the unusual request for discovery about a juror’s potential misconduct. The juror had sent a note asking “What is the maximum amount that can be awarded?” that, because of the circumstances, Ford later believed was part of a scheme to obtain a larger settlement from Ford.

That discovery yielded evidence that Ford then used as the foundation of a fraud claim to rescind its settlement agreement. The trial court ruled in its favor. The court of appeals reversed, concluding that the evidence on some elements of fraud was legally insufficient. The Texas Supreme Court
disagreed.1

On the first element of fraud, the question is whether a jury question is a statement of fact capable of being false. The Court held that the jury question was, implicitly, a representation about a fact in the world, namely, that the jury was actually deliberating about damages (which some evidence here suggested was not true). “Because the note implies statements that are false, we conclude that some evidence exists” to constitute the first element of a fraud claim.

On the question of whether the note was sent with the coordination of (and therefore attributable in some way to) the plaintiff’s counsel, the Court noted that the evidence here was circumstantial — but that evidence of fraud is often, by its nature, circumstantial. “[C]ircumstantial evidence must be evaluated in light of all the known circumstances, not merely in isolation.” Here, because of curious statements made by those counsel during the ongoing negotiations — which keyed the amount of settlement demanded to an oddly specific prediction about a note that might come from the jury — the Texas Supreme Court found the evidence of this element legally sufficient.

Proving a defendant’s ownership of premises

A fight took place outside a nightclub. An injured person sued Graham Central
Station, Inc., which responded (in part) that a different legal entity
(an LLC doing business under this name at this location) was the right defendant
as the entity that ran this location. The plaintiff did not amend.

The court of appeals held that there was sufficient evidence on this trial
record to conclude that the “Inc.” was the proper defendant. The Texas Supreme
Court disagreed.

What’s interesting about the opinion is how the Court dealt with evidence very
near the line that separates “no” from “some” evidence, including two
pieces of ambiguous trial testimony. The Court ultimately invoked the “equal
inference rule, under which a factfinder ‘may not reasonably infer an ultimate
fact from meager circumstantial evidence which could give rise to any number
of inferences, none more probable than another.'” (citing Hancock v. Variyam,
400 S.W.3d 59, 70-71 (Tex. 2013)).

Case Granted

The Court has chosen to hear another case about home foreclosure, this one about the recovery of attorney’s fees. The case is Wells Fargo Bank, N.A. v. Patrick O’brien Murphy a/k/a O’brien Murphy and Beverly Murphy, No. 13-0236 .

The lenders here argue that they can use the general Uniform Declaratory Judgments Act to obtain an attorney’s fee award against a homeowner for their home equity loan and that doing so does not offend the Texas Constitution’s protections of home borrowers. The court of appeals was divided on the question, with a majority favoring the home borrower.

This case will be argued October 15, 2014.

  1. The general tenor of the Court’s reaction is visible in, among other places, the footnotes, the first two of which observe that the judge and a former state representative are now serving prison sentences related to schemes to sell favorable rulings. ↩