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.


“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