Texas Supreme Court Opinion Summaries — 4/27/18

Posted by Rich Phillips, Emily Fitzgerald, and Chris DachniwskyHere are the summaries of the 10 cases issued by the Supreme Court of Texas on April 27, 2018:No. 16-0301, Oncor Electric Delivery Co. LLC v. Chaparral Energy, LLC — In a unanimous opinion by Justice Boyd, the Supreme Court held that the Texas Public Utility Commission (PUC) has exclusive jurisdiction to resolve breach-of-contract claims against a PUC-regulated utility. In 2007, Chaparral Energy hired Oncor Electric Delivery to provide electricity to two wells Chaparral had recently drilled. Oncor allegedly represented that it could complete the work within about 90 days, or earlier. After a series of delays, and allegedly false representations, Oncor completed construction in December 2008. Chaparral sued Oncor in district court for breach of contract, alleging that Oncor did not act with good faith, failed to use reasonable diligence, and engaged in intentional misconduct. A jury found Oncor breached the contract and awarded damages to Chaparral. Oncor appealed and argued for the first time that the PUC had exclusive jurisdiction over the breach-of-contract claims. The court of appeals denied Oncor’s “jurisdictional challenge” and affirmed the trial court’s judgment. The Texas Public Utility Regulatory Act (PURA) grants the PUC exclusive jurisdiction over “the rates, operations, and services of an electric utility.” Therefore, the Court analyzed whether the breach of a private contract falls within the scope of this exclusive jurisdiction. Determining that “services” is defined to have “its broadest and most inclusive meaning,” the Court held that the breach-of-contract claim involves Oncor’s “services,” and therefore the claim falls under the PUC’s exclusive jurisdiction. The Court further determined that the inadequate-remedy exception does not apply to relieve Chaparral of the obligation to exhaust its administrative remedies before the PUC before seeking relief in district court, and that requiring Chaparral to exhaust its administrative remedies does not deprive it of its constitutional rights to a jury trial or open courts.No. 16-0519, Honors Academy, Inc. v. Texas Education Agency — This appeal arises from attempts by two open-enrollment charter schools to challenge a decision by the Commissioner of Education to revoke their charters. The Texas Education Code requires the Commissioner to revoke the charters of open-enrollment charter schools that fall below certain financial or academic standards for three consecutive years. The statute provides for an appeal to the State Office of Administrative Hearings, but mandates a deferential “arbitrary and capricious or clearly erroneous” standard of review and bars any judicial review of the administrative law judge’s decision. In a unanimous opinion by Justice Devine (Justice Blacklock did not participate in the decision), the Court held that the schools’ charters were not vested property rights and rejected a claim that the revocation violated the due course of law clause of the Texas Constitution or the prohibition on retrospective laws. The Court reasoned that because charter schools are essentially part of the public school system and not purely private entities, they are similar to subordinate governmental units (like municipal corporations), who do not acquire vested rights against the state. The Court also rejected the charters schools’ attempts to invoke the ultra vires doctrine to support their claims against the Commissioner. The Court concluded that because the statute at issue made the Commissioner’s decision final and unappealable, the schools were required to establish a “conspicuous and irreconcilable conflict” between the Commissioner’s actions and the statute to obtain relief in an ultra vires suit. Because they failed to do so, they could not obtain relief. Justice Johnson issued a brief concurring opinion, again noting his concern about whether the Legislature has the constitutional authority to grant governmental immunity. Justice Johnson has commented on this in other cases, and seems to be inviting someone to bring a case to the Court that would allow full consideration of this issue.No. 16-0542, Fort Worth Transportation Authority v. Rodriguez — This appeal arises from a wrongful-death suit against the Fort Worth Transportation Authority, two independent contractors, and the driver of a FWTA bus, after the bus hit and killed a pedestrian. The driver was employed by McDonald Transit, Inc., which was a subsidiary of McDonald Transit Associates, Inc. These two entities were, in turn, independent contractors of the FWTA. The primary issues in the appeal relate to how the damages cap in the Texas Tort Claims Act applies to FWTA, the two independent contractors, and the bus driver. Because the FWTA is a governmental unit, the claim is governed by the TTCA, which waives liability for certain claims, but includes a $100,000 damages cap. The TTCA also includes an election-of-remedies provision that bars recovery against governmental employees if the plaintiff sues the governmental unit. The court of appeals held that the $100,000 cap applies to each entity (the FWTA and its contractors) such that the plaintiffs could recover up to $300,000. The court of appeals also held that the bus driver was not protected by the election-of-remedies provision because she was employed by one of the contractors, not by the governmental unit. In an opinion by Justice Green (joined by Chief Justice Hecht and Justices Guzman, Devine, and Brown), the Court noted that the statute that authorizes local transportation authorities to contract with private entities to perform services expressly grants a private contractor the same limitation on liability contained in the TTCA. The Court then held that this damages cap applies cumulatively to the FWTA and the independent contractors such that the plaintiffs’ total recovery against all three entities is limited to $100,000. The Court next held that the bus driver was protected by the election-of-remedies provision in the TTCA. The Court reasoned that if the independent contractors are treated as the government for purposes of liability, then the employee of the contractor should be treated as a governmental employee for purposes of liability. Justice Johnson issued a dissenting opinion (joined by Justices Lehrmann and Boyd). The dissenters would have held that the cap applies individually to each defendant and that the bus driver is not protected by the election-of-remedies provision in the TTCA. The dissent also points out that there may be constitutional issues with the Legislature’s attempt to limit a private party’s liability, but does not address those issues because they were not raised by the plaintiffs.No. 16-0588, Lujan v. Navistar, Inc. — In this commercial dispute, the Court held that Texas recognizes the “sham-affidavit rule,” resolving an issue that has been festering for a long time in the courts of appeals. In a unanimous opinion by Justice Blacklock, the Court held that under Rule 166a(c), a trial court may not weigh the evidence or determine its credibility, but the court “may conclude that a party does not raise a genuine fact issue by submitting sworn testimony that materially conflicts with the same witness’s prior sworn testimony, unless there is a sufficient explanation for the conflict.” The Court warned that this rule does not authorize trial courts to strike every affidavit that contradicts the affiant’s prior sworn testimony. “Sometimes a contradictory affidavit is warranted. But an explanation for the contradiction is also warranted.” Further, the Court noted that federal precedent applying the sham-affidavit rule is persuasive because Federal Rule of Civil Procedure 56(a) is materially indistinguishable from Rule 166a(c). The Court clarified that application of the sham affidavit rule: (1) does not require a finding of bad faith;(2) does not conflict with the Court’s holdings in Gaines v. Hamman, 358 S.W.2d 557 (Tex. 1962) (holding that when “conflicting inferences may be drawn from the deposition and from the affidavit of the same party, a fact issue is presented”), or Randall v. Dallas Power & Light Co., 752 S.W.2d 4 (Tex. 1988) (holding that when an inconsistency exists, depositions control over affidavits), because the sham affidavit rule provides only that the trial court may insist on a sufficient explanation, and may grant summary judgment if none is forthcoming, when the circumstances point to the likelihood of a sham rather than a legitimate conflicting inference; and(3) is reviewable for abuse of discretion. No. 16-0626, Willacy County Appraisal District v. Sebastian Cotton & Grain, Ltd. — This case arises from a dispute about the taxation of grain inventory stored on property in Willacy County. The property owner (Sebastian Cotton & Gran, Ltd.) initially told the appraisal district that it owned the grain and claimed an exemption from taxation. But when it received the tax bill (which rejected the exemption), Sebastian sought a modification of the tax roll to reflect that most of the grain was owned by a third party, DeBruce Grain. In support of that modification, Sebastian provided contracts showing the grain was sold to DeBruce. The chief appraiser agreed to change the tax rolls and the parties entered into an agreement under section 1.111(e) of the Property Tax Code. Sebastian received a refund on taxes paid and a new tax bill was sent to DeBruce. DeBruce then protested because the contracts at issue provided that they were subject to the National Grain and Feed Association Rules, which provided that title to the grain had not yet transferred to DeBruce. DeBruce also pointed out that two of the sale contracts had been cancelled. The appraisal district changed the tax rolls back to reflect that the grain was owned by Sebastian, and Sebastian challenged the district’s authority to make that change. In a unanimous opinion by Justice Green, the Supreme Court held that (1) the correction was permissible under section 25.25(b) of the Property Tax Code; (2) the agreement between Sebastian and the chief appraiser under section 1.111(e) could be vitiated by fraud; and (3) Sebastian is not entitled to seek attorney’s fees under section 42.29 of the Property Tax Code, because that section does not provide for fees in a proceeding under section 25.25(b).No. 16-0804, Perryman v. Spartan Texas Six Capital Partners, Ltd. — In this deed-interpretation case, the Court addressed the application of the rule from Duhig v. Peavy-Moore Lumber Co., 144 S.W.2d 878 (Tex. 1940), which applies when a deed purports to grant more than the grantor owns without disclosing the grantor’s limited interests. In Duhig, the grantor purported to convey 1/2 of the property to the grantee and to reserve 1/2 to himself. But the grantor did not disclose that a third party already owned 1/2 of the property. In that case, the Court held that because the grantor misrepresented what he owned by purporting to convey 1/2 and reserve 1/2, the grantor was estopped from claiming the 1/2 interest he tried to reserve for himself. Here, the deed provided that the grant of the royalty interest was “less, save and except” an “undivided one-half (1/2) of all royalties from the production of oil, gas and/or other minerals that may be produced from the above described premises which are now owned by the Grantor.” At the time of the conveyance, the grantors owned all of the premises, but owned only 3/4 of the royalty interests. The court of appeals held that the Duhig rule applied to estop the grantors from claiming an interest in the 1/2 of the royalties excepted from the conveyance. In a unanimous opinion by Justice Boyd (but without the participation of Justice Blacklock), the Court reached the “same basic outcome as the court of appeals,” but did so using a different rationale. The Court first concluded that the deeds at issue did not create a Duhig problem, because they did not purport to reserve any royalty interests for the grantors. They merely excepted 1/2 of the royalty interest from the grant. (In reaching this conclusion, the Court disagreed with both petitioners and respondents, who all agreed that the “less, save, and except” language was a reservation.) Instead, the Court construed the language of the exception clause to determine what was conveyed. The Court invoked the last-antecedent doctrine to conclude that the most reasonable construction of the deed is that the “now owned by Grantor” language modifies only “premises,” and not “royalties” or “minerals.” Therefore, the Court concluded that the clause excepted 1/2 of all the royalties from all of the premises, which means that the deeds conveyed 1/2 of the royalty interests, not just 1/2 of the royalty interest the grantors then owned. That left the grantees collectively with 1/2 of the royalty interest, the grantors with 1/4 of the royalty interest and the third party with the 1/4 royalty interest it already owned.No. 16-0829, In re State of Texas — This case arises from a civil commitment order for a person found by a jury to be a sexually violent predator. The civil commitment procedure allows the State to continue supervision and treatment of someone found to be a sexually violent predator after completion of the criminal sentence. The statute at issue requires appointment of counsel for indigent persons at specified hearings during the civil commitment. In 2015, the relevant statute was amended to provide for a tiered system of supervision and treatment. The amendment also provided a procedure to modify already existing civil commitment orders to make them compliant with the amended statute. In this case, the person subject to civil commitment argued that he was entitled to appointment of counsel for the hearing to modify his civil commitment order under the 2015 amendments. In a unanimous opinion by Justice Lehrmann (Justice Blacklock did not participate in the decision), the Supreme Court disagreed. The Court first concluded that nothing in the statute requires appointment of counsel for the modification hearing. The Court then rejected the argument that due process required appointment of counsel because of the limited nature of the modification hearing. The Court expressly reserved any issues about the constitutionality of the civil commitment procedure as amended in 2015 and emphasized the narrow issue presented in this case.No. 16-0851, In re North Cypress Medical Center Operating Co., Ltd. — The primary issue in this mandamus proceeding is whether a hospital’s negotiated reimbursement rates with private insurers are discoverable by an uninsured patient in a suit about the reasonableness of charges for medical treatment. In an opinion by Justice Lehrmann (joined by Justices Johnson, Boyd, Devine, Brown, and Blacklock), the Court held that those reimbursement rates are relevant and discoverable. The Court noted that the amounts charged by hospitals to uninsured patients are “increasingly arbitrary” and “are set as high as possible because reimbursement rates increase typically increase along with them.” Thus, because the “vast majority” of a hospital’s payments for its services come from private insurers and public payers, the reimbursement rates negotiated with those private insurers and public payers are at least some evidence of what constitutes a reasonable charge. The majority also noted that other courts across the nation have reached the some conclusion. Chief Justice Hecht (joined by Justices Green and Guzman) dissented. The dissent primarily argued that the Court’s previous decision in In re National Lloyds Insurance Co., which holds that the amount of one party’s attorney’s fees in a case is generally irrelevant in determining the reasonableness of its opponent’s fees, is indistinguishable from this case, and that the marginal relevance of the private and public reimbursement rates will be outweighed by risks of abuse and confusion to the jury.No. 16-0935, Youngkin v. Hines — In this first of two cases addressing Texas’s anti-SLAPP statute (the Texas Citizens Participation Act), the Supreme Court holds that an attorney’s statements in open court constitute the exercise of the right to petition such that a lawsuit brought in response to those statements may be dismissed under the TCPA. The case arises from a claim by one party in litigation against the other side’s lawyer for allegedly defrauding him out of certain real estate through a settlement agreement read into the record in a prior litigation. The attorney moved to dismiss the claims under the TCPA, arguing that his recital of the settlement agreement into the court record constituted the exercise of his right to petition. In a unanimous opinion by Justice Lehrmann, the Court first held that the TCPA applies to these statements even though the attorney was not exercising his own right to petition, because while the statutory text references the First Amendment, it does not restrict the definition of the term “exercise of the right to petition” to only constitutionally protected activities.  The Court then held that the attorney had established the affirmative defense of attorney immunity even though he submitted no evidence on that defense, because the facts required to support the defense are: (1) the type of conduct at issue and (2) the existence of an attorney-client relationship, neither of which were contested issues.No. 17-0437, Castleman v. Internet Money Limited — In this second TCPA case of the day, the Supreme Court addressed the application of the commercial-speech exception to the TCPA. In a per curiam opinion, the Supreme Court noted a divide between the courts of appeals on how to interpret the commercial-speech exception, and clarified that the exception applies when four factors are present: (1) the defendant is primarily engaged in the business of selling or leasing goods; (2) the defendant made the statement on which the claim is based in his capacity as the seller or lessor of those goods; (3) the statement arose out of a commercial transaction involving the goods the seller provides; and (4) the intended audience of the statement was actual or potential customers of the defendant. The Court noted that any other construction would deny the protections of the TCPA to any vendor or merchant, regardless of the context of their speech. Applying these, the Court noted that while the defendant was primarily engaged in the business of selling goods, his allegedly defamatory statements did not arise out of his sale of those goods, but instead arose out of his status as a customer of the plaintiff’s services. Accordingly, the commercial-speech exception did not apply. The Court remanded the case to the court of appeals to address whether the defendant met his burden under the TCPA to secure dismissal of the legal action.