SCoTx HOLDS A SECOND PART OF THE EXPUNCTION STATUTE TO BE “OFFENSE-BASED” RATHER THAN “ARREST-BASED”

Ex parte R.P.G.P.

Supreme Court of Texas, No. 19-1051 (May 14, 2021)

Justice Guzman (Opinion, linked here), Justice Bland Dissenting (Opinion linked here)

Ken Carroll

Expunction is a statutory civil remedy that, when applicable, largely erases the record of an individual's arrest. It allows one who has been arrested to “deny the occurrence of the arrest and [deny even] the existence of the expunction order” itself, except in a criminal proceeding. It also prohibits governmental and private entities named in the expunction order from maintaining, disseminating, or using the expunged records “for any purpose.” A court will issue an expunction order if the prerequisites and conditions specified in the statute are met. See Tex. Code Crim. Pro. art. 55.01. The statute, however, is not a model of clarity. The Supreme Court of Texas describes it as “linguistically complex and present[ing] a statutory construction challenge that courts at all levels have grappled with.”

One particularly vexing problem arises when an individual is arrested on multiple charges, one or more of which later would qualify for expunction if viewed in isolation, while others would not. Until fairly recently, most Texas courts facing that situation had held the test for expunction to be “arrest-based” rather than “offense-based”—that is, if any of the multiple offenses for which the petitioner was arrested did not qualify for expunction, then none covered by that same arrest could be expunged. In 2018, however, the Supreme Court held that Article 55.01(a)(1)—which authorizes expunction on the basis of acquittal or pardon—is “offense-based” rather than “arrest-based,” such that an individual arrested on multiple charges could obtain “partial expunction” and redaction of arrest records for the charges on which he was acquitted or pardoned, even if other charges entailed in the same arrest did not qualify for that relief. State v. T.S.N., 547 S.W.3d 617 (Tex. 2018).

In R.P.G.P., the Court dropped the second shoe, answering a question left open in T.S.N. R.P.G.P. deals with Article 55.01(a)(2), which concerns potential expunction in the context of dismissals and plea bargains. Although that provision has different requirements and conditions than Article 55.01(a)(1), addressed in T.S.N., the Supreme Court reached the same conclusion as in T.S.N., guided by that prior decision—an intricate analysis of the language of the statute compels the determination that “Article 55.01(a)(2) is an offense-based expunction provision and with respect to misdemeanor offenses, the proviso [or condition] in Article 55.01(a)(2)(A) is also offense-based.” Said another way, “the statute recognizes that [a single] arrest for multiple offenses is the functional equivalent of individual arrests for each individual offense,” each of which should be evaluated on its own for expunction purposes under Article 55.01(a)(2).

SCOTx AGAIN TELLS INSURERS: WAITING FOR AN APPRAISAL CAN TRIGGER DELAYED-PAYMENT PENALTIES

State Farm Lloyds v. Hinojos

Supreme Court of Texas, No. 19-0280 (March 19, 2021)

Opinion by Justice Bland linked here.

Dissents by Justices Guzman and Blacklock linked here and here.

Lyndon F. Bittle

The Texas Supreme Court has once again rejected the argument that by eventually paying an appraisal award, an insurer can avoid liability under the Prompt Payment of Claims Act, chapter 542 of the Texas Insurance Code.

As discussed last April in this blog, linked here, the Court has in recent years addressed several scenarios involving an insurer’s payment of an appraisal award long after the deadline imposed by the Prompt Payment Act. In each case, the Court held the insurer was potentially liable for the penalties imposed by the Act, including interest at 18% under section 542.060(a). Hinojos presents a slight variation on the theme. Rather than rejecting the claim, State Farm accepted the claim and paid the amount it determined was due ($2000) within the time period required by the Act. Fifteen months after the policyholder filed suit, Start Farm invoked the policy’s appraisal process. Shortly after the appraisal award was issued—about two and a half years after Hinojos submitted his claim—State Farm paid an additional $23,000. State Farm sought summary judgment on the grounds that “timely payment of the appraisal award precludes prompt payment damages under Chapter 542.” The trial granted summary judgment, and the court of appeals affirmed.

The Texas Supreme Court reversed and remanded. Finding that its previous decisions, including Barbara Technologies Corp. v. State Farm Lloyds (2019) and Alvarez v. State Farm Lloyds (2020), applied to these facts, the Court reiterated, “State Farm’s payment of the appraisal award outside the statutory deadline does not relieve it of Chapter 542 liability.” The Court held the result was compelled by the text of the Act and supported by public policy: “Otherwise, an insurer could pay a nominal amount toward a valid claim to avoid the prompt payment deadline that the Legislature has imposed.”

The dissenting Justices argued the language of the Act and the cases on which the majority relied did not support the majority’s conclusion. While they acknowledged concern about giving insurers “an incentive to low-ball insureds and hope they will accept the initial offer,” the dissenters noted “statutory claims are available against insurers” acting in bad faith, and insisted the Court’s “job is to apply the statutory text, not to worry about whether the text wisely aligns the incentives.”

COMPTROLLER CAN’T LOOK BEHIND COURT’S ORDER OF DISMISSAL IN AWARDING COMPENSATION UNDER THE TIM COLE ACT

In re Alfred Dewayne Brown

Supreme Court of Texas, No. 19-0877 (December 18, 2020)

Justice Guzman (Opinion, linked here)

Ken Carroll 

When Brown’s capital murder conviction was overturned after he had served more than twelve years in prison—most of it on death row—he sought relief under the “Tim Cole Act.” That Act allows a person wrongfully convicted of a crime in Texas to seek compensation from the State if he is “actually innocent” of that crime. The Supreme Court granted mandamus to overturn the State Comptroller’s refusal to pay compensation to Brown under the Act, saying the Comptroller had gone beyond his statutorily prescribed “purely ministerial” role in denying relief to Brown.

To be entitled to compensation under the Tim Cole Act, one must (i) have served at least part of his sentence in prison, (ii) be pardoned or obtain relief from that sentence via habeas corpus, (iii) secure an order of dismissal from the state district court in which he was convicted and sentenced, and (iv) obtain that dismissal based on a motion from the State’s attorney that concludes “no credible evidence exists that inculpates” the applicant and that the State’s attorney “believes that [the applicant] is actually innocent of the crime for which [he] was sentenced.” The wrongfully convicted person must then apply to the State Comptroller for relief under the Act, submitting “verified copies” of the various papers necessary to show his fulfillment of the statutory requirements. The Act directs the Comptroller to “consider only the verified copies of the documents” to determine whether those documents “clearly indicate on their face” that the statutory requirements have been met. The Act emphasizes that the “comptroller’s duty to determine the eligibility of a claimant … is purely ministerial.”

Brown, convicted in 2005 of the murder of a Houston police officer, had his conviction set aside in 2014 because the State had withheld exculpatory evidence in violation of Brady v. Maryland. In 2015, the State elected not to re-try Brown, moving to dismiss because of insufficient evidence, and the trial court granted that motion to dismiss. The Harris County District Attorney, however, appointed a special prosecutor to determine whether Brown should be re-indicted or should be declared actually innocent. After a lengthy investigation, the special prosecutor issued a detailed report concluding Brown “could not physically have been at the crime scene” and therefore was actually innocent. Based on that determination, the District Attorney filed an amended motion in March 2019, asking the trial court to enter an amended order dismissing the case against Brown because of his actual innocence. The Houston Police Officers Union opposed that motion, as amicus curiae, arguing the trial court lacked jurisdiction to enter such an order four years after the earlier dismissal. The district court conducted two hearings on the matter and ultimately issued an amended order of dismissal on the basis of Brown’s actual innocence, in accordance with the District Attorney’s request.

When Brown sought compensation under the Tim Cole Act based on this amended order of dismissal, however, the Comptroller denied that request. All parties acknowledged that all the requisite paperwork had been submitted in proper form as required under the Act. But the Comptroller concluded the amended judgment itself demonstrated that the trial court lacked jurisdiction to issue the amended dismissal order based on actual innocence, four years after the original dismissal order, and therefore that the amended order was void. At the very least, the Comptroller argued, the amended order gave rise to an ambiguity about jurisdiction, such that the documents could not be said to “clearly indicate on their face” that the statutory requirements had been met.

The Supreme Court, though, found the Comptroller had swerved out of his “purely ministerial” lane in undertaking that jurisdictional analysis. The Court concluded that the trial court necessarily determined it had jurisdiction to issue the amended order of dismissal, because “criminal courts are charged with determining their own jurisdiction to issue an actual-innocence order.” And “[w]hen the judge of a proper court signs such an order, the statute requires the Comptroller to accept the court’s legal and factual determinations.” Fundamentally, “[u]nder the statute as enacted, the Comptroller can determine only whether the required dismissal order has been issued, not whether it was correctly issued as a legal or factual matter.” The Court therefore directed the Comptroller to “compensate Brown for the time he was wrongfully imprisoned as required by the Tim Cole Act.”

SCOTX VACATES SANCTIONS AGAINST BREWER, FINDING NO BAD FAITH

Brewer v. Lennox Hearth Products, LLC
Supreme Court of Texas, No. 18-0426 (April 24, 2020)
Justice Guzman (opinion available here)
Justice Boyd, concurring and dissenting (available here)

Kelli Hinson

The Supreme Court of Texas reversed an attorney sanctions award of over $133,000, holding there was no evidence of bad faith by the sanctioned attorney. The movants alleged that attorney Bill Brewer, as counsel for the plaintiffs in a serious personal injury matter, conducted a “push poll” shortly before trial with the intention of influencing the potential jury pool. After seven days of evidentiary hearings, the trial court did not find that Brewer violated any disciplinary rules or other applicable authority, but instead concluded that Brewer’s conduct “taken in its entirety,” including actions of his agents and subordinates, was “an abusive litigation practice that harms the integrity of the justice system and the jury trial process” and was “intentional[,] in bad faith[,] and abusive of the legal system and the judicial process specifically.” The trial court also found Brewer’s attitude in response to the sanctions motion “concerning” due to his (1) “nonchalant and uncaring” demeanor and (2) allegedly “repeatedly evasive” responses to questioning.

The Amarillo Court of Appeals affirmed, holding that the trial court had the authority to impose the sanctions and that the record supported the trial court’s “perce[ption] [that] Brewer’s ‘intentional and bad faith’ conduct in connection with the telephone survey” imperiled the court’s core judicial functions of “empanel[ing] an impartial jury and try[ing] a case with unintimidated witnesses.”

But the Supreme Court disagreed. First, it concluded that a court’s inherent power to sanction attorney conduct requires a finding of bad faith. It defined “bad faith” as “not just intentional conduct but intent to engage in conduct for an impermissible reason, willful noncompliance, or willful ignorance of the facts.” “Errors in judgment, lack of diligence, unreasonableness, negligence, or even gross negligence—without more—do not equate to bad faith.” Next, although the Court agreed that certain aspects of the survey were “reasonably disconcerting to the trial court,” it found “no evidence of bad faith in the attorney’s choice to conduct a pretrial survey or in the manner and means of its execution.” The Court focused on the common use of surveys in pre-trial preparation; the lack of guidelines or rules in the particular jurisdiction concerning the proper use of surveys; the use of third-party professionals in the drafting and execution of the survey; and Brewer’s limited involvement in drafting the survey questions and selecting the potential survey participants.

Finally, the Court considered whether Brewer’s demeanor and attitude during the sanctions hearing could provide an alternate basis for the sanctions. It concluded it did not, finding no evidence in the record that Brewer’s behavior interfered with the administration of justice, detracted from the trial court’s dignity and integrity, or even prolonged the hearing to any measurable degree. The Court therefore vacated the sanctions order.

In his concurring and dissenting opinion, Justice Boyd questioned how the Court could find “no evidence” of bad faith given that the “trial court entered specific fact findings after conducting a hearing over the course of seven days, and three distinguished appellate jurists—after making ‘an independent inquiry of the entire record,’ including ‘the evidence, arguments of counsel, written discovery on file, and the circumstances surrounding the party’s sanctionable conduct’—unanimously agree that some evidence supports the trial court’s findings.” But, he found it “far more important and concerning” that the Court’s requirement of “bad faith” in order for a trial court to exercise its inherent authority to sanction “unnecessarily handcuffs our state’s trial courts and undermines the very reason they possess inherent authority in the first place.”

CLASS ARBITRABILITY IS A “GATEWAY ISSUE” TO BE DECIDED BY COURT, NOT ARBITRATOR, ABSENT “CLEAR AND UNMISTAKABLE” CONTRARY AGREEMENT

Robinson v. Home Owners Management Enterprises, Inc.
Supreme Court of Texas, No. 18-0504 (November 22, 2019)
Opinion by Justice Guzman (linked here)

Ken Carroll

This past summer, the United States Fifth Circuit held that whether arbitration under the Federal Arbitration Act may proceed on a class rather than an individual basis is a “gateway issue” to be decided by the court and not the arbitrator, absent the parties’ “clear and unmistakable” agreement to the contrary—joining every other circuit court to have considered the issue. 20/20 Communications, Inc. v. Crawford, 930 F.3d 715 (5th Cir. 2019). Fifteen years earlier, in In re Wood, the Supreme Court of Texas had held the opposite, that “issues of class arbitration are for the arbitrator to decide.” 140 S.W.3d 367, 368 (Tex. 2004). But the ruling in Wood was predicated on language in federal cases that has been “walked back” in more recent decisions. And so, given the opportunity, the Texas Court has now recanted, overruled In re Wood, and joined the majority of courts in holding that class arbitrability is for the court to decide rather than the arbitrator, unless the parties have clearly and unmistakably agreed otherwise.

The Robinsons sued Home Owners Management Enterprises (clever acronym, “HOME”) for poor construction of their new house and for HOME’s failure to repair defects. HOME moved to compel arbitration of the Robinsons’ claims based on provisions in their home warranty. While the matter was pending in arbitration, the Robinsons attempted to add class-action allegations. The arbitrator bifurcated those class issues and proceeded to hearing on the Robinsons’ individual claims. After the arbitrator ruled in their favor on those claims, the Robinsons returned to court, asserted class claims, and demanded that HOME be compelled to arbitrate those claims on a class-wide basis. The trial court, however, held that the issue of class arbitration was for it to decide, rather than the arbitrator, and then ruled that the HOME arbitration agreement did not provide for class arbitration. The Fort Worth Court of Appeals affirmed. The appeals court duly noted that the Supreme Court of Texas previously had held in In re Wood that class arbitrability would be delegated to the arbitrator, rather than the trial court. But it went on to analyze the federal decisions that had addressed the issue after In re Wood, determined that this more recent authority “effectively abrogated the legal premise on which Wood was based,” and concluded the Court likely would now decide the issue differently. It was right.

After reviewing the more recent federal authority for itself, the Supreme Court overruled In re Wood and held, “with the benefit of a more full-bodied jurisprudential debate,” that class arbitrability is “not a procedural question presumptively for the arbitrator,” but, instead—

“(1) arbitrability of class claims is a ‘gateway’ issue for the court unless the arbitration agreement ‘clearly and unmistakably’ expresses a contrary intent;
(2) ‘[a] contract that is silent on a matter cannot speak to that matter with unmistakable clarity’; and
(3) an agreement to arbitrate class claims cannot be inferred from silence or ambiguity—an express contractual basis is required.”

The HOME arbitration agreement did not provide for delegation of arbitrability to the arbitrator or even mention class arbitration. And the Court rejected the Robinsons’ argument that the “broad and sweeping” language of the agreement’s arbitration clause was sufficient to support an inference of intent to delegate. The Court therefore could not infer the parties “clearly and unmistakably” intended to entrust such issues to the arbitrator, and affirmed the lower courts’ rulings on this issue, as well. 

The Supreme Court left two issues unresolved, or at least unaddressed. First, the Robinson decision, like the federal cases it found persuasive, dealt with arbitration under the FAA, because the HOME agreement specifically referenced that statute. The Court did not discuss whether the same result would follow under the Texas Arbitration Act. But there is little reason to think it would not. Second, the Court noted that many courts have found “clear and unmistakable” intent to delegate threshold issues to the arbitrator where the agreement expressly incorporates the broad AAA arbitration rules. The HOME agreement however, neither referenced nor incorporated the AAA rules. So, the question whether incorporation of those rules would demonstrate the necessary “clear and unmistakable” intent to delegate arbitrability to the arbitrator was “not presented here,” and the Supreme Court declined to address it.

“EXPRESS WRITTEN CONSENT” MEANS EXPRESS WRITTEN CONSENT—NO MORE, NO LESS

Barrow-Shaver Resources Co. v. Carrizo Oil & Gas, Inc.
Supreme Court of Texas, No. 17-0332 (June 28, 2019)
Opinion by Justice Green (linked here); Concurring and dissenting opinion by Justice Guzman (linked here); Dissenting opinion by Justice Boyd (linked here)

Derrick Ward

Last Friday, the Supreme Court of Texas delivered a reminder that when drafting contracts, you should say what you mean and mean what you say. The Court also reaffirmed that reliance on oral representations directly contrary to the terms of a written agreement between sophisticated parties is not justifiable.

The case considered a farmout contract between Barrow-Shaver Resources Company and Carrizo Oil & Gas for Barrow-Shaver to build a well on a lease held by Carrizo in exchange for an interest in the mineral rights. The contract contained a consent-to-assign provision prohibiting Barrow-Shaver from assigning its rights under the agreement “without the express written consent of Carrizo.” During negotiations, Barrow-Shaver reportedly raised concerns about the consent-to-assign provision and sought to add language that would prohibit Carrizo from withholding consent unreasonably. But Barrow-Shaver relented when Carrizo’s representative in the negotiations allegedly offered assurances that Carrizo would work cooperatively with Barrow-Shaver in the event assignment became an issue.

Assignment did become an issue, and when Barrow-Shaver approached Carrizo about assigning its rights to another company, Carrizo refused and instead offered to allow Barrow-Shaver to buy its rights to the lease for $5 million, thereby removing the need to have its consent. Barrow-Shaver sued, claiming fraud, breach of contract, and tortious interference, and ultimately obtained a $26-million-dollar jury verdict. The Court of Appeals relied on evidence of contract negotiations excluded by the trial court to conclude that Carrizo was within its rights to withhold consent as a matter of law, because the consent-to-assign provision was unambiguous. The court also rejected Barrow-Shaver’s fraud claim on the basis that oral promises could not justifiably be relied upon when the parties had a written agreement. A divided Texas Supreme Court affirmed that result.

Considering the breach-of-contract claim first, the Supreme Court read the term “consent” as it is traditionally defined, to mean simply “approval.” It rejected Barrow-Shaver’s argument that Carrizo’s right to withhold that approval or consent was somehow qualified or constrained.

The Court then distinguished between material terms to a contract, which might be supplemented or made more precise to ensure enforceability, and immaterial terms, which may not. The Court found all material terms in both the farmout agreement and the consent-to-assign provision were present and sufficiently definite to determine the parties’ rights and obligations. With respect to the consent-to-assign provision specifically, the Court viewed the obligations of each party as clear: “Barrow-Shaver has the right to assign its rights under the farmout agreement, but Barrow-Shaver must first satisfy its obligation to obtain Carrizo’s express and written consent; Carrizo has no obligation.” In the Court’s view, terms related to withholding consent did not require supplementation.

Both parties also sought to have extrinsic evidence considered alongside the language of the contract. Carrizo urged consideration of the prior drafts, which showed that a limitation on Carrizo’s ability to withhold consent had been considered and rejected. Barrow-Shaver proffered expert testimony on industry usage and custom, which it argued could explain the contract’s silence regarding circumstances in which consent could and could not be withheld. Citing the parol evidence rule, the Court declined to consider the earlier drafts of the contract because it found the agreement was unambiguous. The Court also declined to consider the expert testimony regarding industry usage because ‘“express written consent’ within a contract is clear, is not susceptible to more than one meaning, and is not industry or vocation specific.” It further explained that allowing a jury to consider such testimony would invite the creation of ambiguity where none exists.

Because the Court ultimately concluded the consent-to-assign provision “unambiguously allowed Carrizo to refuse its consent for any reason,” Carrizo’s refusal to consent to the assignment could not constitute a breach of contract as a matter of law.

Rejecting Barrow-Shaver’s fraud claim, the Court found Barrow-Shaver was not justified in relying on the oral statements of Carrizo’s contract negotiator. The Court cited long-standing principles requiring that a party take reasonable diligence in protecting his affairs and interests, as well as precedent holding that reliance on oral promises that are directly contradicted by an unambiguous written agreement is not reasonable as a matter of law. The Court viewed Carrizo’s agent’s promises that Carrizo would provide consent to be directly contradicted by the plain language of the consent-to-assign provision, such that Barrow-Shaver could not have reasonably relied upon them.

Justice Guzman, writing for herself, Justice Hecht, and Justice Busby, dissented from the court’s holding on the breach of contract claim and argued forcefully that use of trade usage and custom evidence considered by the jury was appropriate and that the majority was wrong to reject it and the conclusions the jury reached from hearing it. The three Justices would have reached the same outcome on the fraud claim, but for different reasons. Justice Boyd dissented to argue for the inclusion of both custom and usage evidence and evidence of the contract negotiations and would have remanded for a new trial including both types of evidence.

While this case arose in an oil and gas context, the Supreme Court’s opinion underscores the importance of insuring that any agreement reflects the actual intent of the parties. As Barrow-Shaver found out the hard way, often if it isn’t in the written contract, it isn’t part of the deal.