Last year, we reported on the Dallas Court of Appeals’ decision to affirm the trial court’s denial of the Office of Attorney General’s plea to the jurisdiction in a Whistleblower Act case. Today, the Texas Supreme Court has reversed and rendered, holding that the whistleblower’s report to her superior at OAG was not made to “an appropriate law enforcement authority,” as required by the Whistleblower Act. The plaintiff’s pleadings therefore failed to properly invoke the Act, meaning that OAG’s sovereign immunity was not waived.
Office of the Attorney Gen. v. Weatherspoon, No. 14-0582
The Texas Supreme Court granted a baker’s dozen worth of petitions for review this morning, including two cases that first made their way through the Dallas Court of Appeals. In CTMI, LLC v. Fischer, the Court of Appeals held that the earn-out provision in an asset purchase agreement was unenforceable because it left the percentages to be used in calculating the earn-out subject to a future agreement. And in Staley Family Partnership v. Stiles, the Court of Appeals rejected an attempt to impose an easement by necessity because one of the two tracts of land was not being used at all when they were severed from each other in 1866.
Law360 writer Jess Davis takes a look at five Texas Supreme Court cases on the court’s argument calendar for this fall, and we were happy to pitch in with some punditry on a couple of them. The TV Azteca case is a really interesting mix of personal jurisdiction, defamation, pop superstardom, and international sex scandal, while BCCA has the potential to reshape the balance between the state legislature and home-rule municipalities. And while we’ll conspicuously refrain from comment on a couple of the other cases, all five are well worth following.
A year ago, the Dallas Court of Appeals affirmed the denial of an equitable bill of review in which the defendants claimed that the plaintiff had not exercised reasonable diligence in its attempts to effect service through registered mail and personal delivery. The Texas Supreme Court has now set aside that ruling, holding that the defendants had presented some evidence that their failure to receive notice of the default judgment resulted solely from the plaintiff’s failure to certify the defendants’ last known mailing address, and not from any negligence or fault on the defendants’ own part. The record contained evidence that the plaintiff’s owner had met with the defendants’ registered agent at their current address, rather than the outdated address on file with the Secretary of State, that raised a genuine issue of material fact as to the validity of the plaintiff’s “last known mailing address” certification.
Katy Venture, Ltd. v. Cremona Bistro, LLC, No. 14-0629
The U.S. Supreme Court may be poised to decide the validity of same-sex marriage bans nationwide, but the Texas Supreme Court has managed to have its voice heard to declare that it doesn’t have anything to say. Because the State of Texas was too late in seeking to intervene in a same-sex divorce, the Supreme Court held (5-3) that it could not appeal that decree. Justice Willett authored the lead dissent, which would have had the Court address the matter on the merits, while Justice Devine dissented on the merits of same-sex marriage under Texas law. So with that out of the way, everyone can turn their eyes back to 1 First St., NE.
State v. Naylor
In August 2013, the Dallas Court of Appeals held that “viatical settlements” — basically, interests in bought and resold life insurance policies — were securities within the scope of the Texas Securities Act. Likely because of a conflict between that holding and a previous case out of the Waco Court of Appeals, the Supreme Court granted the petition for review and set the case for oral argument. This morning, the Supreme Court unanimously affirmed the Dallas court’s opinion, finally confirming that the trial court had erred in granting summary judgment for the defendants. The case was remanded for further proceedings, presumably including trial on the merits.
Life Partners, Inc. v. Arnold, No. 14-0122
Two years ago, the Dallas Court of Appeals ruled that PlainsCapital Bank was not entitled to judgment against a borrower because it based its deficiency claim on the price it obtained when the property was sold a year after foreclosure, rather than the fair market value of the property at the time it was foreclosed. Last summer, the Texas Supreme Court granted the bank’s petition for review and set the case for oral argument. This morning, the Supreme Court held that the Court of Appeals was correct in ruling that § 51.003 of the Texas Property Code controlled PlainsCapital’s deficiency claim. However, the Court also ruled that “fair market value” under the deficiency statute does not mean the price that a willing buyer would pay to a willing seller at the time of foreclosure. Because § 51.003(b)(5) permits the trier of fact to consider the forward-looking factor of discounts that may be applied to a future sales price, it was proper for the trial court to base its fair market value finding on the price the bank actually received in its post-foreclosure sale. The Supreme Court remanded to the Court of Appeals for consideration of additional issues.
Justice Boyd (joined by Justice Guzman) dissented, arguing that the majority had improperly cast aside the historical definition of fair market value, and that evidence of any future discounts in the sale price of the property was only relevant to consideration of the fair market value at the time of the foreclosure.
TLDR: To determine FMV at the time of foreclosure, you can look to values received in the future.
PlainsCapital Bank v. Martin (majority)
PlainsCapital Bank v. Martin (dissent)
In 2013, the Dallas Court of Appeals held that “viatical settlements” — basically, interests in life insurance policies purchased and then resold by Life Partners, Inc. — were securities subject to the Texas Securities Act. Given that the opinion expressly rejected a contrary holding from the Waco Court of Appeals, we predicted that this would be a good candidate for review by the Texas Supreme Court. And in fact, that court granted the petition for review today, consolidating the case for oral argument with another Life Partners case out of the Austin Court of Appeals. The argument has been set for January 15, and we will keep you posted when an opinion is issued.
Previously: Viatical Settlements Are Securities (Aug. 29, 2013)
One year ago, the Dallas Court of Appeals held that a homeowner’s negligence claims against the company that installed the home’s plumbing were barred by the economic loss doctrine. Today, the Texas Supreme Court has reversed that ruling in a per curiam opinion. Although the plumber’s liability to the homebuilder was contractual, the negligent performance of a contract that injures a non-party’s person or property is sufficient to state a claim for negligence. The Supreme Court reiterated that the economic loss rule does not permit a party to avoid tort liability to the rest of the world simply by entering into a contract with another person.
Chapman Custom Homes, Inc. v. Dallas Plumbing Co., No. 13-0776
The Texas Supreme Court today affirmed the Dallas Court of Appeals’ judgment in a wrongful death/asbestos case, which had vacated an $11.6 million plaintiff’s verdict. The majority opinion disagreed with the Court of Appeals’ holding that the plaintiff had to prove that the decedent would not have contracted mesothelioma but for his exposure to the defendant’s own product. Nevertheless, applying the “substantial factor” test for causation, the majority held that the plaintiff had still failed to provide legally sufficient evidence that the defendant’s product had caused the victim’s illness.
Bostic v. Georgia-Pacific Corp. (majority)
Bostic v. Georgia-Pacific Corp. (Guzman concurrence)
Bostic v. Georgia-Pacific Corp. (Lehrmann dissent)