Texas Supreme Court Opinions and Orders (6/20/14, pt. 2)

As promised, here are the summaries of the other half of the opinions that the Texas Supreme Court issued on June 20, 2014. For the first half, click here.No. 11-0810, LAN/STV, J.V. v. Martin K. Eby Construction Co. – In a unanimous opinion by Chief Justice Hecht, the Court held that the economic loss rule does not allow a general contractor to recover increased costs of performing its contract with the property owner in a tort suit against the architect for negligent misrepresentation, i.e., errors in the plans and specifications. The Court agreed with the Restatement approach that application of the economic loss rule should not change simply because the plaintiff pleaded a claim for negligent misrepresentation instead of negligent performance of services. But the Court disagreed with the Restatement approach to claims against an architect. The Court reasoned that the parties’ can contractually allocate the risk of errors in the plans and specifications. The opinion is available here.No. 12-1013, Schlumberger Technology Corp. v. Arthey – This case involves social-host liability for drunken driving. Because the drinking allegedly took place on a fishing boat, the plaintiff argued that federal maritime law (which would impose liability on the host) applied instead of Texas state law (which would not impose liability). In an unanimous opinion by Chief Justice Hecht, the Court concluded that federal maritime law does not apply and that the defendant was entitled to summary judgment. The Court applied the location test and connection test articulated by the United States Supreme Court in Jerome B. Grubart, Inc. v. Great Lakes Dredge & Dock Co. to determine whether the case fell under federal admiralty jurisdiction. The Court found a fact issue on the location test because there was some evidence that the tort took place in navigable waters. There was some evidence that the driver had been drinking on the boat and that Schlumberger employees were aware of his drunken state. But the Court found that Schlumberger conclusively established that the connection test is not met. The Court held that drinking while fishing does not pose more than a fanciful risk to commercial shipping. The Court also held that drinking while fishing is not substantially related to a traditional maritime activity. Because Schlumberger conclusively established that the connection test is not met, it conclusively established that admiralty jurisdiction does not apply. Click here for the opinion.No. 13-0158 – Ford Motor Co. v. Castillo – This opinion is the final round in a dispute about the enforceability of a settlement agreement reached during trial. During deliberations, the jury sent out a note asking about the maximum amount of damages that could be awarded. The parties settled soon after the note was received. While interviewing the jurors after they were dismissed, Ford discovered that most of the jurors did not know about the note and that the jury had not yet started deliberating on damages. In a prior appeal, the Supreme Court held that Ford was entitled to conduct discovery regarding the circumstances of the note because there was circumstantial evidence of outside influence. Ford Motor Co. v. Castillo, 279 S.W.3d 656, 666 (Tex. 2009). After that discovery was conducted, there was a jury trial about the enforceability of the settlement agreement. The jury found that Ford had been fraudulently induced into settling. The Corpus Christi Court of Appeals reversed. In a per curiam opinion, the Supreme Court reversed the court of appeals and reinstated the jury’s verdict. The Supreme Court found that there was sufficient circumstantial evidence to support a finding of collusion between the presiding juror (who sent the note) and the plaintiffs’ counsel. Among other things, the Court pointed to the following: (1) the case was tried by Judge Abel C. Limas, who is currently in federal prison for taking bribes from attorneys for favorable rulings; (2) there was some evidence that the presiding juror had spoken on the phone to State Representative Jim Solis, who is currently in federal prison for his role as the middle man in Judge Limas’s bribery scheme; (3) the other jurors recalled that presiding juror caused a one day recess in deliberations by claiming that one of her children was in the hospital, but the presiding juror could not remember anything about it when she testified at the fraudulent inducement trial; (4) during the one-day recess, the settlement negotiator for the plaintiffs repeatedly told the defendants that he would settle the case for $3 million if the jury sent out a note asking about the maximum amount of damages; (5) one juror testified that on the day after the recess, the presiding juror arrived in a very happy mood and told the other jurors that the case would be settled that day. Click here for the opinion.No. 13-0639, State Office of Risk Management v. Carty – The Fifth Circuit certified three questions to the Supreme Court about a workers’ compensation insurer’s right to recover excess proceeds recovered by multiple beneficiaries. Under the Workers’ Compensation Act, if the beneficiary recovers from third parties for any injuries that are compensable under the act, the insurer is entitled to be reimbursed for benefits paid to the beneficiary and to treat any excess as an advance on benefits owed. In a unanimous opinion by Justice Lehrmann, the Court held that “when multiple beneficiaries recover compensation benefits through the same covered employee, the carrier’s rights to a third-party settlement are determined by treating it as a single, collective recovery rather than separate recoveries by each beneficiary.” The opinion is available here.- Rich Phillips, Thompson & Knight