Posted by Rich Phillips
During the month of January, the Supreme Court of Texas issued seven opinions.
On January 6, 2017, the Court issued two opinions:
No. 15-0005, Oncor Electric Delivery Co., LLC v. Public Utility Comm'n — Eight parties to a Texas Public Utility Commission ratemaking proceeding regarding the rates of Oncor Electric Delivery Company sought judicial review of three issues: (1) whether the Public Utilities Regulatory Act ("PURA"), which requires electric utilities to discount charges for services provided to public universities, applies to all utilities or only utilities with no retail electric competition; (2) whether the Commission erred in determining Oncor’s future tax liability, for purposes of setting its rates at a level that allows a reasonable rate of return on investment, as if Oncor were a separate corporation, rather than as if it were included in its corporate parent’s tax return; and (3) whether the franchise fees charged to Oncor by municipalities for the use of their public spaces were reasonable and necessary expenses under PURA, or whether they were per se unreasonable because they exceeded the statutory formula. Click here for the Court's opinion.
On the first issue, the Court held that PURA’s higher education discount does not apply to Oncor, because Oncor does not sell electricity directly to customers, including Texas’ public universities. Because Oncor transmits electricity from power generating companies to retail electric providers, who in turn provide electricity to public universities, PURA does not require Oncor to discount its charges.
On the second issue, the Court then held that the Commission’s decision to treat Oncor as a separate corporation for tax purposes was not arbitrary or capricious. While Oncor had the option under federal law to be included in the affiliated group of corporate entities eligible to be included in their parent’s tax return, Oncor did not in fact make that election. The relevant law requires that an electric utility’s taxes be computed as if a consolidated return had been filed only if the utility is a member of an affiliated group eligible to file a consolidated return and it would have been advantageous for the utility to do so. The Supreme Court noted that the statute requires that the utility actually be a member of such an affiliated group, not merely that the utility could have been a member. Because Oncor did not choose to be such a member, the section did not apply to its tax liability.
Finally, the Court held that the franchise fees charged to Oncor by various municipalities were reasonable and necessary despite differing from the statutory formula, because the statutory formula was not an exclusive means of setting the franchise fees. Based on the lack of exclusive language in the subsection setting out the formula, the Court concluded that while the amount of franchise fees charged pre-deregulation must be considered per se reasonable and necessary, municipalities and utilities are free to negotiate other rates as well—but those other rates must be shown to be reasonable and necessary in order to be passed along to retail customers.
No. 15-0225, Denbury Green Pipeline-Texas, LLC v. Texas Rice Land Partners, Ltd. — This is the second time that this condemnation dispute has been before the Supreme Court. The first time (Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas, LLC, 363 S.W.3d 192 (Tex. 2012)), the Court held that for a pipeline owner to condemn property as a common carrier, the condemnor has the burden to establish a reasonable probability that the pipeline at issue would be used to transport carbon dioxide for customers other than the pipeline owner. On remand, the trial court found that the condemnor carried this burden, but the court of appeals reversed.
In an opinion by Justice Green, the Supreme Court reversed the court of appeals, reinstating the trial court’s judgment, because Denbury Green’s summary judgment evidence conclusively established a reasonable probability that the pipeline would, at some point after its construction, serve the public and not just Denbury Green. In so holding, the Supreme Court rejected the intent-based test applied by the Court of Appeals, clarifying that the test for whether a particular proposed use of property is public or private (and therefore whether eminent domain may be used to condemn property in favor of the proposed use) is an objective, not subjective, test. The Supreme Court also rejected the Court of Appeals’ imposition of a requirement that the proposed use serve a "substantial" public interest. Instead, it is enough that "the pipeline will, at some point after construction, serve even one customer unaffiliated with the pipeline owner."
And on January 27, 2017, the Court issued five opinions:
No. 14-1038, Kramer v. Kastleman — In this case, the Court was called on to address how the acceptance-of-benefits doctrine applies to a divorce decree. In an opinion by Justice Guzman, the Court reiterated that acceptance-of-benefits is a fact-dependent doctrine "focused on preventing unfair prejudice to the opposing party." The Court identified 10 non-exclusive factors that should inform application of the doctrine. When the Court applied these factors to the facts of this case, the Court concluded that the petitioner's dominion over marital assets in this particular case did not "rise to the level of estoppel" and reversed the court of appeals' dismissal of the appeal.
No. 15-0056, Brady v. Klentzman — In this defamation case, the Court addressed whether the jury charge was constitutionally proper. The defendants wrote and published a newspaper article about a police chief's use of his authority on his son's behalf. The son sued, claiming that the article defamed him. Over the defendants' objection, the jury charge put the burden on the defendants to prove that the statements in the article were true. The charge also defined "malice" as an intent to harm, without requiring that the defendants knew the statements were false or were reckless regarding their falsity. In an opinion by Justice Devine (joined by Justices Johnson, Guzman, Lehrmann, and Boyd), the Court held that the subject of the article was a matter of public concern. As a result, the trial court should have placed the burden on the plaintiff to prove the falsity of the allegedly defamatory statements. The Court also held that the charge did not properly define "malice" for purposes of defamation. Based on these errors, the Court held that the trial court's judgment must be reversed. The majority concluded that there was at least some evidence of damages and therefore remanded the case for a new trial. Chief Justice Hecht filed a dissenting opinion joined by Justices Green, Willett, and Brown. The dissenters would have held that there was no evidence of damages and would have rendered judgment for the defendants instead of remanding the case for a new trial.
No. 15-0197, UDR Texas Props. LP v. Petrie — In this case, the Court again addressed the duty of a property owner to protect invitees from the criminal acts of third parties. The court of appeals held that the existence of a duty depends solely on the five factors identified in the Supreme Court's decision in Timberwalk Apartments Partners, Inc. v. Cain, 972 S.W.2d 749 (Tex. 1998). In an opinion by Justice Brown, the Supreme Court reversed and held that the Timberwalk factors relate only to whether the risk of a criminal act by a third party was foreseeable. In addition to those factors, a plaintiff must also show that the risk of harm was unreasonable. Because the plaintiff did not make such a showing, the Court rendered judgment that the plaintiff take nothing. Justice Willett filed a concurring opinion (joined by Justice Boyd), in which he noted that the duty analysis in these cases overlaps with the negligence analysis. As a result, trial judges are asked to make a foreseeability finding that is usually made by a jury. The concurrence doesn't purport to resolve any of these issues, but simply notes that it raises the issues "only to kindle further study from the bench, bar, and academy."
No. 15-0978, Nassar v. Liberty Mut. Fire Ins. Co. — In this insurance coverage dispute, the Court was asked to determine whether a fence attached to a home was covered by the "dwelling" provision or the "other structures" provision of the insurance policy. The "dwelling" provision covered the dwelling and "structures attached to the dwelling." The "other structures" provision covered that any structure set apart from the dwelling, even if connected to the dwelling by a fence, utility line, or other similar connection. The homeowners argued that the fence was covered under the "dwelling" provision because it was attached to the house. The insurance company argued that the fence could not be a "structure" because in the "other structures" provision, fences were identified as connectors. In a per curiam opinion, the Court found that the homeowners' construction was reasonable and that the insurance company's construction was unreasonable.
No. 16-0773, Hall v. McRaven — This dispute between a University of Texas regent and the chancellor produced a total of five opinions. Regent Wallace Hall sued Chancellor McRaven seeking complete access to records regarding student admissions. McRaven produced only redacted versions of the information. The Court was asked to determine if Hall had pleaded a viable ultra vires claim such that sovereign immunity did not bar the suit. In an opinion by Justice Devine, the Court concluded that McRaven's discretion to determine what information should be redacted was absolute. Therefore, the Court found that Hall had not alleged that McRaven acted ultra vires and affirmed the court of appeals' dismissal of the suit. Justice Willett filed a concurring opinion noting that the proper application of ultra vires law is not always fair: "I join the Court’s opinion. The doctrine of sovereign immunity, by insulating imprudence, is innately unfair to those wronged. The deal it strikes is often a raw deal." Justice Guzman filed a concurring opinion "primarily to underscore that the issues raised and the applicable legal standards restrict the Court’s ability to reach the merits of the underlying dispute." Justice Lehrmann filed a concurring opinion, in which she emphasized the importance of protecting the confidential student information that the Chancellor redacted from the records provided to Hall. Finally, Justice Brown filed a concurring opinion (joined by Justice Green), which he emphasizes that the Court's role ended when it determined that it did not have jurisdiction over Hall's claims: "The question we face here is whether sovereign immunity bars the petitioner’s claims. It does. Case over."