Texas Appellate Watch

Texas Supreme Court Orders and Opinions — March 15, 2019

Posted by Rich Phillips, Melissa Davis, Emily Fitzgerald, and Connor Bourland

In its weekly orders on Friday, March 15, the Texas Supreme Court issued opinions in four argued cases. The Court did not grant any new petitions for review.

No. 17-0336, City of Denton v. Rushing — This interlocutory appeal from an order denying the City of Denton’s plea to the jurisdiction arose from City employees’ suit for breach of the City’s Policies and Procedures Manual. The employees argued that the manual created a unilateral contract for which the City could be sued under Texas Local Government Code sections 271.151-.160, which waive governmental immunity for certain contracts with local governmental entities. The City argued that the manual could not create a contract because it contained a general disclaimer stating that, “the contents of this manual do not in any way constitute the terms of a contract of employment.” In an opinion by Justice Devine, the Court agreed with the City. The Court held that although some of the provisions of the manual could suggest contractual intent, the disclaimer prevented the formation of a contract and, thus, the waiver in the Local Government Code did not apply. The Court held that while a policy manual can form the basis of a contract, it could not do so here because of the broad disclaimer.

No. 17-0423, Hays Street Bridge Restoration Group v. City of San Antonio — This case also arose from a plaintiff's attempt to invoke the waiver of governmental immunity in Texas Local Government Code sections 271.151-.160. In this case, the plaintiff sued the City of San Antonio seeking specific performance of a contract related to the restoration and preservation of the Hays Street Bridge. In the contract, the plaintiff promised to raise funds for the project and to transfer the funds to the City and the City promised to use those funds for the project. The plan included acquisition of a tract near the bridge that could be used for parking, educational facilities, restrooms, a park, and hike and bike trails. After the plaintiff arranged for the donation of the tract, the City contracted to sell that land to a private company instead of using it for the bridge project. The plaintiff sued, seeking specific performance of the parties' agreement. In an opinion by Chief Justice Hecht, the Court held first that the City was acting in a governmental capacity when it entered into the contract, and thus the City was entitled to immunity unless it has been waived. The Court then considered whether the waiver in the Local Government Code applied to suits for specific performance. Although the waiver excludes certain types of damages from the scope of the waiver, it does not exclude the remedy of specific performance. Accordingly, the Court held that the statute waived the City's immunity from suit for a claim for specific performance.

No. 17-0588, Hillman v. Nueces County — The Supreme Court held that a former assistant district attorney’s suit against Nueces County was barred by governmental immunity. Hillman served as an assistant district attorney in Nueces County. He sued Nueces County, asserting that he was fired for refusing an instruction to withhold exculpatory evidence from the defense while he was preparing to prosecute a charge of intoxicated assault and leaving the scene of an accident. The county asserted that Hillman’s claim was barred by governmental immunity. In an opinion by Justice Boyd, the Supreme Court agreed with the county. The Court held that its prohibition on terminating an at-will employee for the sole reason that the employee refused to perform an illegal act, as articulated in Sabine Pilot Service, Inc. v. Hauck, 687 S.W.2d 733 (Tex. 1985), was inapposite because Sabine Pilot involved a private-sector employer, not a governmental employer protected by immunity. The Court declined Hillman’s request to extend Sabine Pilot to governmental employers. Further, the Court held that the Michael Morton Act, which requires the prosecution to disclose exculpatory evidence to the defense, does not clearly or unambiguously waive governmental immunity and is thus immaterial to the immunity analysis. Finally, the Court declined Hillman’s request to abolish governmental immunity altogether, deferring to the Legislature to deal with such policy concerns. Justice Guzman authored a concurring opinion, joined by Justices Lehrmann and Devine, urging the Legislature to address whether sovereign immunity should be waived when the employee alleges the termination was for the sole reason that the employee refused to perform an illegal act. 

No. 17-0666, International Business Machines Corp. v. Lufkin Industries, Inc. — In this case, the Court was again asked to address what it takes to contractually disclaim a future fraud claim. IBM sold Lufkin Industries a business-management software system that IBM misrepresented in material ways. Lufkin sued to recover the extensive losses it suffered as a result of IBM’s failure to deliver. The jury awarded Lufkin millions of dollars for fraud and fraudulent inducement but nothing for negligent misrepresentation or breach of contract. In an opinion by Justice Boyd, the Court reiterated that not every disclaimer of reliance is effective and that courts must examine the contract itself and the totality of the surrounding circumstances to apply the factors identified in Schlumberger and Forest Oil to determine whether the disclaimer bars the claims at issue. After considering those factors, the Court determined that the disclaimer here barred Lufkin's fraud claims. The Court rejected Lufkin's argument that its claims were based on representations in the parties' agreements. The Court also rejected Lufkin’s argument that the disclaimer provisions themselves were not negotiated, pointing out that Lufkin admitted to negotiating other deal points. But the Court held that the evidence conclusively established that IBM’s breach of the purchase contract caused Lufkin some amount of damages. Therefore, the Court reversed the jury’s contrary finding and remanded for new trial on that claim. Justice Blacklock did not participate in this decision.

In nominations news, the Senate judiciary committee voted to advance the nomination of Brett Busby to fill Justice Johnson's seat to the full Senate, which is expected to vote this week. And President Trump has nominated Justice Jeff Brown to become a federal district judge in the Southern District of Texas, so the governor will need to nominate a replacement once Justice Brown's nomination to the district court confirmed by the U.S. Senate. President Trump has also nominated Justice Ada Brown from the Dallas Court of Appeals to become a district judge in the Northern District of Texas.

Texas Supreme Court Orders and Opinions — March 8, 2019

Posted by Rich Phillips, Stephanie Dooley Nelson, and Melissa Davis

In its weekly order list on March 8, 2019, the Texas Supreme Court issued decisions in four argued cases. The Court did not grant any new petitions for review. Access the complete order list here.

The Court issued opinions in the following cases:

No. 17-0058, Eddington v. Dallas Police & Fire Pension System — The Court addressed the meaning of Article XVI, Section 66 of the Texas Constitution, which prohibits the reduction or impairment of certain types of benefits under local public retirement systems. The Dallas Police & Fire Pension System changed its plan to reduce the interest rate paid on Deferred Retirement Option Plan accounts. The Court concluded that the "benefits" protected by Section 66 are only accrued benefits based on service rendered and that the section does not protect benefits expected but not yet earned for future service. In reaching this conclusion the Court agreed with the Fifth Circuit's decision in Van Houten v. City of Fort Worth, 827 F.3d 530 (5th Cir. 2016). Because the changes at issue in this case were prospective only and affected only benefits to be earned through future service, the Court found that the changes did not violate section 66. Access the opinion by Chief Justice Hecht for the unanimous court here. (Justices Guzman and Brown did not participate in the decision.)

No. 17-0409, Hughes v. Tom Green County  — The issue in this interlocutory appeal from a plea to the jurisdiction is whether Tom Green County has governmental immunity from Hughes’s claim that the County breached a Mutual Partial Assignment (MPA) executed by the County, Hughes, and other will beneficiaries in a prior probate case. Hughes claimed that the County failed to perform one portion of the MPA, and the County asserted it was immune from Hughes’s suit.

Under Tex. A&M Univ.–Kingsville v. Lawson, 87 S.W.3d 518 (Tex. 2002), when a governmental entity settles a suit in which it lacked immunity, it cannot claim immunity in a subsequent suit to enforce the settlement. The court of appeals distinguished Lawson on the grounds that (a) the MPA was not a settlement agreement and (b) the County had not waived its immunity in the probate action. In an opinion by Justice Devine, the Supreme Court disagreed on both accounts. First, the Court held that the MPA was a settlement agreement because it settled their dispute as to whether the County or the heirs were entitled to funds also claimed by other beneficiaries. Second, the Court held that the County did not have immunity in the probate action, relying on Reata Constr. Corp. v. City of Dallas, 197 S.W.3d 371 (Tex. 2006). The Court observed that the underlying justifications for immunity assume “that the government is an unwilling litigant, haled into the court by a private plaintiff,” and do not apply with equal force when a governmental entity “invokes the jurisdiction of the courts to assert its own claims.” The Court determined that “[w]ithout question, the county was a voluntary litigant” in the probate action, and the County’s intervention to assert its claim to the funds “invoked jurisdiction over all adverse claims to title,' which the County knew had to be adjudicated for it to be awarded title.” The Court expressly rejected the court of appeals’ suggestion that Lawson was limited to statutory waivers of immunity.

Justice Boyd, joined by Justices Lehrmann and Brown, concurred in the judgment but not the Court’s analysis. The concurring justices agreed that Lawson governed but disagreed with the majority’s reliance on Reata. They reasoned that the claim Hughes asserted in the probate action never implicated the County’s immunity in the first place because Hughes asserted a competing claim to the funds, not a counterclaim against the County. Thus, they concluded that Reata was not relevant here.

No. 17-0660, Rosenberg Development Corp. v. Imperial Performing Arts, Inc. — The Court was asked to decide whether governmental immunity extends to an economic development corporation created by a municipality. In an opinion by Justice Guzman, the Court concluded that economic development corporations are not entitled to immunity. The Court noted that the judiciary determines applicability of immunity in the first instance and then defers to the Legislature to make decisions about whether to waive immunity that has been recognized by the courts. The Court then analyzed the statute authorizing creation of economic development corporations and determined that the Legislature did not intend economic development corporations to have "discrete governmental-entity status separate and apart from its authorizing municipality." The Court also reiterated that even if the Legislature had designated economic development corporations as governmental entities, it would still be the judiciary's province to decide whether they are entitled to immunity. And in looking at the reasons for immunity, the Court found that they were not satisfied by economic development corporations. Chief Justice Hecht issued a concurring opinion in which he emphasized that his view was based on the "highly unusual features of a Class B municipally-created economic development corporation."

No. 17-0835, Dallas Symphony Association, Inc. v. Reyes — The primary issue in the case is the scope of Texas Civil Practice & Remedies Code Section 51.014(a)(6), which allows an interlocutory appeal of an order that “denies a motion for summary judgment that is based in whole or in part upon a claim against or defense by a member of the … media … or a person whose communication appears in or is published by the electronic or print media, arising under” constitutional or statutory free speech protections. The plaintiff in this case sued the defendants for defamation and other torts. The defendants moved for summary judgment, and the trial court granted it as to some claims, but not all. Both sides appealed. The court of appeals held that section 51.014(a)(6) allows an immediate appeal only of denial of summary judgment on claims or defenses that arise under free speech protections. Accordingly, the court of appeals concluded it had jurisdiction to consider only those claims.

In an opinion by Chief Justice Hecht, the Supreme Court disagreed. The Court noted that the statute authorizes an interlocutory appeal from “an order” denying a motion for summary judgment “that is based in whole or in part” on claims or defenses arising under the free speech laws. Therefore, the Court concluded that section 51.014(a)(6) allows interlocutory appeal of all issues decided in the order, not just the issues arising under free speech. The Court found that the defendants were entitled to summary judgment on all of their claims and remanded the case for entry of final judgment.

(In other news, it has been a while since summaries were posted to the blog, but we're back and should be posting regularly going forward. We may also post summaries of some of the cases that have been decided over the last few months. We appreciate your patience and hope you'll find our posts useful going forward.)