May 8, 2015

Greetings,

Today the Texas Supreme Court released 13 opinions in a variety of subject matters. We will discuss 11 of the opinions. However, there was a family law opinion and a free speech opinion that will not be discussed below.

Phillips v. Carlton Energy Group, LLC, Case No. 12-0255: http://www.txcourts.gov/media/962835/120255.pdf

The Court clarified what "reasonable certainty" means when presenting evidence of lost profits as consequential damages. The Court identified the common thread you must look for: the claim for lost profits must be "substantial in the circumstances" and not "hypothetical or hopeful." The Court also held that reasonable certainty of proof should apply when lost profits are used to determine the market value of property for which recovery is sought. The Court determined that the lost profits awarded in this oil and gas case were based on speculation rather than reliable evidence tied to the reality of the anticipated profits and remanded to the appellate court.

Gharda USA, Inc. v. Control Solutions, Inc., Case No. 12-0987: http://www.txcourts.gov/media/962836/120987.pdf

In this case, the Court reversed a decision by the trial court and appellate court that interlocking expert testimony was inadmissible when two of four experts could not identify the probable origin of the fire and the other two experts relied on the first two experts to identify the origin of the fire. The Court found that the expert testimony as a whole was nothing more than speculation and, thus, unreliable. The Court held that all four expert's testimony was inadmissible.

Genie Industries, Inc. v. Matak, Case No. 13-0042: http://www.txcourts.gov/media/962837/130042.pdf

In this case, the Court examined whether an aerial lift that tipped over while being moved was an "unreasonably dangerous product" under Texas' products liability law. Signs on the machine and instructions in the user manual warned of the obvious danger: the machine would tip over and the worker would fall to the ground, which is what happened. So obvious was the danger that although over 100,000 lifts of the same general model have been sold all over the world, the jury was provided with evidence of only three similar accidents involving similar AWP lifts over the past decade-none of which involved the intentional destabilization of a fully-extended 40' lift. The jury found the product was unreasonably dangerous.

The Court disagreed. The Court found little evidence of a safer alternative design for the aerial lift. Further, the Court found no evidence that the aerial lift was unreasonably dangerous. Thus, the Court reversed the judgment of the court of appeals sustaining the trial court's verdict and rendered judgment for the manufacturer of the aerial lift.

RSUI Indemnity Co. v. The Lynd Co., Case No. 13-0080: http://www.txcourts.gov/media/962839/130080.pdf

This appeal involved an excess insurance policy that covered multiple commercial properties and limited the coverage to "the least" of three alternative amounts. When fifteen of the covered properties were damaged in one occurrence, the insurer calculated "the least" of the three alternative limits separately for each covered item at each damaged property, on an item-by-item basis. The insured argued that "the least" of the three limits applies just once in any one occurrence to the total of all losses from all covered items at all of the damaged properties. The trial court agreed with the insurer, and a split court of appeals agreed with insured.

The Court started its analysis by recognizing that the Scheduled Limit of Liability endorsement could be reasonably read to support either party's proposed construction. Thus, the Court's analysis then shifted to whether the insured's reading was reasonable, if so it would trump the insurer's proposed interpretation.

The Court rejected the insurer's argument that if the Court followed the insured's proposed calculation for covered damages at the scheduled locations taken as a whole, the insured could recover more than the 115% of scheduled value recoverable allowed under the policy while avoiding the payment of premiums associated with such risk. The Court also rejected the insurer's argument that following the insured's construction would place it outside the majority of states that considered the issue, instead concluding that national jurisprudence did not require the Court to ignore the ambiguity in this specific policy, especially given the significant distinguishing features in the cases from other jurisdictions facing this issue.

Thus, the Court affirmed the court of appeals judgment adopting the insured's reasonable proposed construction of the Scheduled Limit of Liability endorsement.

Abutahoun v. The Dow Chemical Co., Case No. 13-0175: http://www.txcourts.gov/media/962841/130175.pdf

In this mesothelioma case, the Court was asked to consider whether Chapter 95 of the Texas Civil Practice and Remedies Code applies to an independent contractor's negligence claims against a property owner when the claims are based on injuries arising out of the property owner's negligent activities and not the independent contractor's own work. Applying the plain meaning of the statute, the Court affirmed the court of appeals and held that Chapter 95 applies to all independent contractor claims for damages caused by a property owner's negligence when the requirements of Section 95.002(2) are satisfied.

City of Dallas v. TCI West End, Inc., Case No. 13-0795: http://www.txcourts.gov/media/962842/130795.pdf

The Court reversed the Court of Appeals and found that a municipality can pursue a civil action under Section 54.012(3) of the Texas Local Government Code against a property owner to enforce an ordinance for zoning that provides for the use of land or classifies a parcel of land according to the municipality's district classification scheme. The Court remanded the case to the Court of Appeals for further proceedings.

Gonzalez v. Ramirez, Case No. 14-0107: http://www.txcourts.gov/media/962844/140107.pdf

The Texas Supreme Court reviewed whether a party that contracted with a truck driver's employer can be held liable as a motor carrier under either the Federal Motor Carrier Safety Regulations (FMCSR) or its Texas counterpart. Gonzalez, the owner and sole proprietor of Gonzalez Farms, agreed to harvest Chester Farms' silage and haul it to the Littlefield Feed Yard. Gonzalez contracted with several companies to transport the silage, including 3R/Garcia Trucking, owned by Robert Garcia. Gonzalez's harvester operators loaded the trucks at the farm and signaled to the driver when the trailer was full, and the driver then delivered the load to the feed yard.

On October 5, 2009, Garcia brought to the farm several trucks he had previously used to transport the silage, along with a tandem truck and a new driver, Raymond Ramirez. On the tandem truck's first trip to the feed yard, a tire blew out, causing Ramirez to lose control and careen into oncoming traffic, colliding with the car in which Tammy Jackson and her fourteen-year-old daughter were traveling, tragically killing all three.

Because no evidence existed that Gonzalez hired Garcia to transport property across state lines, the FMCSR do not apply. In examining the Texas Regulations, the Court noted that the line of cases examining this issue had confused Texas and federal law. Accordingly, the Court disapproved of prior Texas cases to the extent they have found motor-carrier liability under the Texas Regulations based on duties created by Part 376 of the Federal Regulations because the Texas Regulations did not incorporate Part 376 of the FMCSR, and held the court of appeals erred in finding potential liability under the same in this case.

The Court restated the Texas rule that Gonzalez was a "motor carrier" under the Texas Regulations if he "control[led], operate[d], or direct[ed]" the operation of the truck. Tex. Transp. Code § 643.001(6). Further, when analyzing whether a defendant is a motor carrier, courts must focus on the specific transaction at issue.

Under the circumstances presented here, where Plaintiff's evidence only showed that Gonzalez told Garcia where to pick up and deliver-which any hauler would need to know -and loaded the trucks, Gonzalez was acting as a shipper, not a motor carrier. The Court found it made no sense to burden Gonzalez with the many duties already placed upon Garcia. Further, the Court found that Plaintiff presented no evidence that Gonzalez exercised any control over the trucks or the drivers as they transported the silage to the feed yard. Nor did Gonzalez select the particular trucks Garcia used. Accordingly, even in the light most favorable to Plaintiff, the Court held that no evidence shows that Gonzalez controlled, operated, or directed the operation of the trucks involved in the hauling operations at issue. See Tex. Transp. Code § 643.001(6). Thus, the Court held the trial court properly rendered summary judgment on Plaintiff's claims against Gonzalez under the Texas Regulations.

Finally, the Court also determined that Gonzalez did not breach any common law duties he owed to the truck driver as an employee of an independent contractor. The Court held that, "If the fact that the general contractor is the 'boss' of a subcontractor were enough to create liability, the requirement of control would be obsolete. Similarly, someone hiring a subcontractor to transport something will often need to specify what type of vehicle may be needed. It takes a logical leap to conclude that Gonzalez's unexercised general right to refuse to load an unsafe truck and his suggestion of a particular type of truck prevented 3R/Garcia from performing the work in its own way. Accordingly, no evidence supports the Ramirez's' assertion that Gonzalez owed Ramirez a common-law duty."

Life Partners, Inc. v. Arnold et al and Life Partners Inc. v. State of Texas (consolidated): http://www.txcourts.gov/media/962845/140122.pdf

Affirming the Dallas and Austin Courts of Appeal, the Texas Supreme Court held that life settlement agreements are investment contracts and, thus, "securities" as defined by the Texas Security Act. The Court also refused to only apply its holding prospectively.

In re Longview Energy Company, Case No. 14-0175: http://www.txcourts.gov/media/962846/140175.pdf

In this case, the Court reversed the trial court and held that damages that cannot be explained as compensatory do not require a supersedeas bond for purposes of appeal. In this case involving breach of fiduciary duties for usurping corporate opportunities by a private equity investment fund that owed 39% of Longview's stock and controlled 2 board seats, the trial court imposed a constructive trust over the Eagle Ford shale assets at issue and the future production revenues net of royalties and production taxes. It also awarded $95.5 million, which in the original judgment was "based upon the jury's findings regarding the past production revenues derived from the Eagle Ford shale assets minus what the defendants paid to acquire the assets. In an amended judgment, the court omitted the explanation for the award of the $95.5 million.

The Court found that the damage award was either (1) punitive and did not require a bond or (2) unexplained. Thus, it did not require a bond.

Molina v. Alvarado, Case No 14-0536: http://www.txcourts.gov/media/962848/140536.pdf

Plaintiff originally sued the City of McCamey for negligence and negligence per se under the TTCA for a car accident involving a city employee that the Plaintiff alleged was under the influence of alcohol at the time of the accident while operating a city vehicle within the course and scope of his employment. The city asserted the sovereign immunity defense. After the trial court denied Plaintiff's special exceptions regarding the asserted immunity defense, Plaintiff joined the city employee. The employee filed a general denial and moved for summary judgment based upon the TTCA's election of remedies provision. Tex. Civ. Prac. & Rem. Code § 101.106(a). The trial court denied his motion for summary judgment and the court of appeals affirmed on an interlocutory appeal.

The Texas Supreme Court agreed with the employee and reversed. The Court held that under Tex. Civ. Prac. & Rem. Code § 101.106(a) once a Plaintiff elects to sue either the governmental unit or the employee in its individual capacity, he is "immediately and forever" barred from later electing to sue the other regarding the same subject matter. Without hearing oral arguments, the court reversed the court of appeals and rendered judgment in favor of the city employee.

Conclusion:

We hope that you find the update on these cases to be useful to your practice. This week, the Court meets in conference on Monday and Tuesday. Additionally, the Court holds the New Lawyer Induction Ceremony this Monday as well. Check back with us next week, to learn if the Texas Supreme Court provides us with further guidance on the evolution of Texas law with new opinions.

Best Regards