Texas Supreme Court weekly orders (6/20/14)

In its order list for June 20, 2014, the Texas Supreme Court issued opinions in eight cases and granted review in one case. In this post, I will summarize the opinions in four cases, and also describe the case in which the Court granted review. Rich Phillips will do a separate post summarizing the opinions in the other four cases. Click here to read the order list. Click here to access all of the opinions.1. No. 11-0447, Ritchie v. Rupe — In this case about alleged oppression of a minority shareholder in a closely held corporation, the Court first construed former article 7.05 of the Texas Business Corporation Act (current section 11.404 of the Texas Business Organizations Code), which allows the court to appoint a “rehabilitative receiver” for certain types of conduct, including “oppression.” The plaintiff alleged that she was oppressed when the majority owners refused to meet with potential buyers of her stock. Adopting a stringent definition of “oppression,” the Court held that this conduct was not oppressive. (The Court defined “oppression” as conduct that “abuse[s] [the majority’s] authority over the corporation with the intent to harm the interests of one or more of the shareholders, in a manner that does not comport with the honest exercise of their business judgment, and by doing so create[s] a serious risk of harm to the corporation.”) Next, the Court held that it was improper, under the statute, to require the corporation to buy out the minority shareholder. The Court found that the statute allows only one remedy, which is the appointment of a rehabilitative receiver. Finally, the Court declined to recognize a common-law cause of action for minority  shareholder oppression. Justice Guzman (joined by Justices Willett and Brown) dissented on the basis that, under traditional definitions of “oppression,” there was evidence of oppression, and on the basis that the statute does allow lesser remedies, such as a forced buy-out.2. No. 12-0739, Americo Life, Inc. v. Myer — In this arbitration case, the parties’ agreement required that each arbitrator be a “knowledgeble, independent businessperson or professional.” The parties also agreed to be bound by the AAA rules in effect when arbitration was demanded. The AAA rules at the time arbitration was demanded required that each arbitrator be “impartial.” Americo’s first two arbitrator choices were disqualified by the AAA on the basis that the appointees were not “impartial.” The Supreme Court held that this was error, because although the parties’ agreement required the arbitrators to be “independent,” it did not require “impartiality.” Thus, the Court found that the ultimate arbitration panel was improperly formed and therefore lacked jurisdiction. As a result, the Court vacated the award against Americo. Justice Johnson (joined by Justices Willett, Lehrmann, and Boyd) dissented on the basis that the parties’ agreement, by incorporating the AAA rules, did require “impartiality.”3. No. 13-0156, Key Operating & Equip., Inc. v. Hegar — In this case, two mineral leases were pooled, but there was production from only one lease. The surface owners of the nonproductive lease complained about the operator’s use of their surface to get access to the operations on the productive lease. The Court held that the operator had the right to ingress and egress using the surface of the nonproductive lease that was pooled with the productive lease.4. No. 13-0450, Graham Central Station, Inc. v. Pena — The plaintiff alleged injuries suffered during a fight outside a nightclub called Graham Central Station. The issue on appeal was whether there was evidence that the club was owned by the defendant found liable, Graham Central Station, Inc. The Court held that there was no such evidence of ownership. As to statements by one witness, the Court found that the only reasonable inference to be drawn was that the club was owned by another entity. As to the testimony of a security guard that he was paid by “Graham Central Station,” the Court applied the equal-inference rule because it could be equally inferred that he was referring to the real owner.The case in which the Court granted review is No. 13-0236, Wells Fargo Bank, N.A. v. Murphy. This case involves a home foreclosure. One issue is whether the homeowners can be liable for attorney’s fees in a declaratory-judgment claim. Another issue is whether the court of appeals improperly reframed the declaratory-judgment claim as an injunction claim.– Scott Stolley, Thompson & Knight