Texas Appellate Lawyer & Attorney : D. Todd Smith Law Firm : Appeals, Sanctions, Summary Judgment : Austin, Texas

Of all the Texas Supreme Court decisions issued last week, Fairfield Insurance Co. v. Stephens Martin Paving, LP (04-0728) is arguably the most significant.  In that case, the Court answered "no"—sort of—to the Fifth Circuit's certified question, "Does Texas public policy prohibit a liability insurance provider from indemnifying an award for punitive damages imposed on its insured because of gross negligence?"

More accurately, the Court reframed the question narrowly and answered it this way:  "Pursuant to article V, section 3-c of the Texas Constitution and rule 58.1 of the Texas Rules of Appellate Procedure, we answer that Texas public policy does not prohibit coverage under the type of workers' compensation and employer's liability insurance policy at issue in this case."

That answer begs the question, "How about other types of insurance policies?"  More on that in a minute.

Citing three out-of-state cases, the Court first described a two-step analysis for determining whether exemplary damages are insurable.  The Court decides (1) whether the policy's plain language covers the exemplary damages sought in the underlying suit against the insured; and (2) if so, whether Texas public policy allows or prohibits coverage under the circumstances, considering any express statutory provisions regarding the insurability of exemplary damages.

The Court skipped the first part of its newly announced analytical standard and proceeded to the second step.  After reviewing the relevant statutes, the Court concluded that "[t]he Legislature's expressed intent is that Texas public policy does not prohibit insurance coverage for claims of gross negligence in this context."

That's it.  Certified question answered.  Opinion over at page 10, right?

Wrong.  This is where it gets interesting—so much so as to spark concurring opinions from Justice Hecht and Justice Johnson.

Recognizing "the import of this issue," the Court went on to discuss the "considerations relevant to determining whether Texas public policy prohibits insurance coverage of exemplary damages in other contexts in the absence of a clear legislative policy decision."  What follows over the next 17 pages is an impressively researched explication of how every other state has treated the issue, as well as a discussion of key cases outlining both sides of the debate and the critical policy concerns:  freedom of contract and whether, based on the specific circumstances, the purpose of imposing exemplary damages is served.

Folks who were hoping for ultimate resolution of whether punitive damages are insurable in Texas are undoubtedly disappointed.  Although the Court said more than was needed to answer the Fifth Circuit's certified question, it stopped well short of adopting a bright-line rule.  Indeed, just about everything other than worker's compensation coverage remains open for further debate under the framework announced in this case.

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Per How Appealing, an article entitled The Irony of Judicial Elections (abstract with link for download) will appear in the March 2008 issue of the Columbia Law Review.  The article's abstract reads as follows:

Judicial elections in the United States have undergone a dramatic transformation.  For more than a century, these state and local elections were relatively dignified, low-key affairs.  Campaigning was minimal; incumbents almost always won; few people voted or cared.  Over the past quarter century and especially the past decade, however, a rise in campaign spending, interest group involvement, and political speech has disturbed the traditional paradigm.  In the new era, as commentators have dubbed it, judicial races routinely feature intense competition, broad public participation, and high salience.

This Article takes the new era as an opportunity to advance our understanding of elective versus nonelective judiciaries.  In revisiting this classic debate, the Article aims to make three main contributions.  First, it offers an analytic taxonomy of the arguments for and against electing judges that seeks to distinguish the central normative concerns from the more contingent, empirical ones.  Second, applying this taxonomy, the Article shows how both the costs and the benefits of elective judiciaries have been enhanced by recent developments, leaving the two sides of the debate further apart than ever.

Third, the Article explores several deep ironies that emerge from this cleavage.  Underlying these ironies is a common insight:  As judicial elections achieve greater legitimacy as elections, it will tend to undermine the judiciary's distinctive role and our broader democratic processes.  There is an underappreciated tradeoff between the health of judicial elections and the health of the judiciary, the Article posits, that can help recast the controversy over the new era.

Sounds like something members of the Legislature ought to read before taking up judicial election reform again in 2009.

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The following comes from Jerry Bullard of Adams, Lynch & Loftin, P.C. in Bedford, who co-chairs the State Bar Appellate Section's Bench-Bar Liaison Committee:

Dear Friends and Colleagues:

As many of you know, the final days of a legislative session are often characterized by political posturing and gamesmanship that ultimately lead to the demise of key pieces of legislation.  We saw it in 2005 when a parliamentary maneuver killed the judicial pay raise bill in the waning hours of the regular session (of course, the bill ultimately passed in a subsequent special session).  Well, this session appears to be no exception as a House member raised a point of order that effectively killed SB 1204.  Also, critical deadlines passed this week without the House or Senate acting on many of the other bills that I have been tracking, thereby virtually ending any chance of passage this session.  The following is a status of [certain] bills that have appeared on my updates this session:

SB 1204 - Court Reorganization/Complex Courts

• Bill Analysis:  Senate Research Center
• Status:  On May 21, 2007, a point of order was raised on the House floor and was sustained.
• Summary:  Rep. Senfronia Thompson (D- Houston), a solo practitioner, stopped the House's debate of CSSB 1204 with a point of order.  Thompson complained that the analysis of S.B. 1204 did not conform to the changes that the House Judiciary Committee had made in the bill.

SB 1167 - Appeals Under Federal Arbitration Act

• Bill Analysis:  Senate Research Center
• Status:  On May 21, 2007, SB 1167 was placed on the Houses General State Calendar.
• Summary:  SB 1167 appears to have died as the House deadline to consider Senate bills has passed.  SB 1167 would have authorized an interlocutory appeal of a court order denying a motion to compel arbitration under the Federal Arbitration Act (FAA).  The law currently requires a party to file a petition for writ of mandamus to seek review of orders denying motions to compel under the FAA while similar orders under the Texas General Arbitration Act are subject to interlocutory appeal.  This bill attempted to eliminate confusion relating to the appeal of such orders.

HB 3095 - Disposition of Appeals

• Status:  Pending in the House Judiciary Committee as of May 7, 2007.
• Summary:  HB 3095 has died in committee.  The bill's author, Rep. Corbin Van Arsdale (R-Houston), told the House Judiciary Committee that HB 3095 was filed because certain appellate courts were dragging their feet on certain rulings, and he wanted to start a conversation about speeding up the disposition of appeals.  Van Arsdale expressed a desire to see the issue studied between sessions.

HJR 89 - Board Certification for Appellate Justices and District Judges/Increases in Age and Experience Requirements for District Judges

• Status:  Pending in the House Judiciary Committee as of April 16, 2007.
• Summary:  HJR 89 has died in committee.  It is my understanding that the bill was filed in order to increase the qualifications of Texas judges.  Supporters of the bill believed it would be easier to pass than a merit selection bill.

SB 806 - Judicial Appointment/Retention& SJR 32 - Constitutional Amendment for Judicial Appointment/Retention

• Status:  Referred to the Senate Jurisprudence Committee on March 7, 2007.
• Summary:  SB 806 and SJR 32, which were authored by Sen. Duncan, never got off the ground and died in committee without a hearing.  This legislation related to the appointment of certain judicial offices and a nonpartisan election for the retention or rejection of a person appointed to those offices.

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I must admit, SB 1167 has flown under my radar.  This bill addresses a problem I ranted about earlier and, if passed, could eliminate "dual track" review of orders denying arbitration.  View the bill analysis here.

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In In re AXA Financial, Inc., the Third Court of Appeals has consolidated a mandamus with an interlocutory appeal from an order denying the defendants' motion to compel arbitration.  To be honest, this event is not terribly noteworthy, but with the legislature in session, it seems timely to mention the procedural gaffe that triggers such parallel proceedings.

Basically, while the legislature has authorized an interlocutory appeal from an order denying arbitration under the Texas statute, our courts have uniformly held that no corresponding statutory remedy exists when the Federal Arbitration Act is in play.  Lawyers attempting to enforce an arbitration clause most often seek relief under both statutes for fear they will pick the wrong one.  When denying relief, trial courts usually don't explain their reasoning, leaving the movant's counsel no choice but to pursue both an appeal and a mandamus, with the Texas Supreme Court's blessing.  At the supreme court's behest, the intermediate appellate courts routinely consolidate the parallel actions.

As others have written before me, this is a silly rule that ought to be corrected.  (Some, most notably Heidi Bloch, say it already has been; the courts just don't recognize the change.)  The legislature could prevent the waste of having to bring two separate actions, only to have them consolidated, by tweaking the appellate provisions of the Texas General Arbitration Act.  Unfortunately, with the time for filing new bills passed, it will be at least 2009 before common sense can prevail.

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In follow-up to this post, the Senate State Affairs Committee has scheduled another hearing on SB 1204 for April 2 at 9:00 a.m.  In addition, the witness list from this past Monday's hearing and the Legislative Budget Board's fiscal note are available.

UPDATE:  Per a revised notice, SB 1204 has been removed from Monday's Senate State Affairs Committee agenda.

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I wasn't able to attend yesterday'shearing on SB 1204, but the debate was apparently lively.  According to this morning's report in the Austin American-Statesman, legislators, trial lawyers, and judges bristled at the bill's scope during more than four hours of testimony before the Senate State Affairs Committee.  Much of the criticism focused on the proposal to adopt special rules and procedures for "complex cases," which some fear would disenfranchise local judges implicitly deemed incapable of adjudicating such matters.

The Texas Trial Lawyers Association and the Texas Association of Defense Counsel don't agree on much, but both organizations oppose SB 1204. The bill seems to be losing momentum.

UPDATE:  Video of this hearing is now available through the Senate RealMedia site.  It is split into Part I andPart II(RealPlayer required).

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The Senate State Affairs Committee will hear SB 1204, the court reorganization bill previously discussed here and here, on Monday, March 26, at 9:00 a.m.  The proceedings will be webcast on the Senate's web site through this link.  The bill analysis was filed today and is available here.

Senator Kirk Watson e-mailed members of the Austin Bar Association today encouraging them to participate in the debate on this bill and welcoming them to contact him or his staff with feedback.  According to Senator Watson's message, those attending the hearing maybe allowed to testify orally or in writing.

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The Austin American-Statesman reports that the sponsors have pulled the House and Senate bills that would have allowed Justice Nathan Hecht to seek compensation for $340,000 in attorney's fees he incurred defending against state ethics charges.  Apparently, the sponsors were no longer willing to support the cause once they learned that Justice Hecht had raised enough money to pay the bill through private contributions.

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Before last Friday's deadline, Representative Dan Gattis filed House Joint Resolution 89, which addresses qualifications of Texas appellate justices (and district judges).  In addition to age and practice experience requirements, HJR 89 would require board certification in at least one practice area recognized by the State Bar.  Justices sitting on November 6, 2007 (the proposed date for submitting the measure to voters for the necessary constitutional amendment) would be grandfathered in.  The measure is currently pending before the House Judiciary Committee.

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While trolling through the Texas Legislature's web site over the weekend, Jerry Bullard, Co-Chair of the State Bar Appellate Section's Bench-Bar Liaison Committee, discovered an interesting bill that he (and I) originally overlooked.  With Jerry's permission, I am posting excerpts from a message he sent his colleagues about the bill, House Bill 3095.

HB 3095, authored by Rep. Corbin Van Arsdale (R-Houston), relates to the periods for disposing of certain actions and petitions by appellate courts in this state.  As its caption suggests, the bill seeks to establish deadlines for the appellate courts to dispose of all cases.  Specifically, HB 3095 would . . . [r]equire the Supreme Court . . . to rule on a regular cause not later than the first anniversary of the date the court agreed to grant review of the cause and grant or deny a petition not later than the expiration of the six-month period after the date the petition was filed.

For Supreme Court proceedings, a regular cause is defined as:  1) a case in which four (4) or more justices decide that a petition should be reviewed; 2) a direct appeal that the Court has agreed to review; or, 3) a certified question that the Court has agreed to review.

A petition means:  1) a petition for review; 2) a petition for writ of mandamus; or, 3) a petition for writ of habeas corpus, prohibition, or injunction.

[HB 3095 would also] [r]equire the intermediate appellate courts to rule or otherwise dispose of an appellate case not later than the expiration of the 18-month period after the date the case was filed with the court.  The term appellate case appears to encompass all cases filed in the courts of appeals.

[Jerry's] initial reaction to HB 3095 is to question whether the deadlines are realistic given the caseload and IOPs in some of the larger intermediate courts, the Supreme Court and the CCA, and whether the bill has the backing to pass.  [Jerry] suspect[s] we'll learn the answer to both questions as the process moves forward.

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More than once, I heard the 78th Legislature's now-infamous House Bill 4 described as "the Full Employment Act for appellate lawyers."  Considering how inaccurate that forecast was, I am approaching Senate Bill 1204, the latest proposed overhaul to the civil justice system (originally mentioned here), with some trepidation.

SB 1204 focuses largely on reforming our state's judicial structure and practice at the trial-court level, primarily by converting Texas's statutory county courts into more than 40 new district courts.  This change would take effect on January 1, 2011, with most of these offices standing for election in 2010.  Another major change would be the creation of a "complex case" judicial panel that would operate much like the multidistrict litigation panels created in 2003.

From an appellate lawyer's perspective, other provisions are potentially significant.  For example, the bill would allow mandamus to the supreme court to challenge a complex case panel's determination that a matter is not in fact "complex."  The bill would also authorize permissive appeals from certain interlocutory orders in complex and multidistrict cases.

Of broader interest, the bill would significantly alter Texas Government Code § 22.001, the statute defining the supreme court's jurisdiction, by deleting all references to specific types of cases (i.e., "dissent" or "conflict" jurisdiction) and recognizing what is now subpart (6) (jurisprudential importance) as defining the supreme court's jurisdictional reach.  This amendment would settle the debate about whether the supreme court must accept certain types of cases by providing true discretionary jurisdiction subject to one exception:  the supreme court "shall grant a petition for review in a case in which a court of appeals has declared void a statute of the state."

Another noteworthy feature of SB 1204 is that it would expressly grant "the supreme court [power to] act on a petition for review when the court deems it expedient."  This provision's purpose is not apparent.  Except for motions for rehearing of causes, the supreme court already works on its own timetable.

We will be hearing and reading a lot about SB 1204 over the next couple of months.  Some of the folks who participated in drafting this bill think it stands a fairly good chance of passage.  From what I understand, an initial hearing on the bill has been set for March19, 2006.  No doubt, this is the beginning of an interesting debate.

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Senator Robert Duncan has filed Senate Bill 1204, which would effect massive changes in the Texas judicial system.  The bill is quite lengthy and warrants close study.  Texans for Lawsuit Reform has issued a press release touting the bill.  Representative Dan Gattis has filed an identical companion bill, House Bill 2906.

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The State Bar's Friday Update reports that Senator Robert Duncan has filed two judicial selection bills.  The first, Senate Bill 806, allows for appointment of certain judicial offices and nonpartisan retention elections.  The second, Senate Joint Resolution 32, proposes a related constitutional amendment.

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The online version of The Austin American-Statesman has this report on Chief Justice Jefferson's State of the Judiciary address to the Texas Legislature today.  According to the article, the Chief called upon lawmakers to review the state's judicial structure and "the growing use of private dispute resolution to settle legal disputes outside the public courts."  In keeping with his platform from last session, the Chief also urged the legislature to establish a commission to review judicial salaries.  The article suggests a connection between the Chief's agenda and changes "being pushed by Texans for Lawsuit Reform, a lobby group with considerable political clout, through Jefferson said his were unrelated."

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With the legislature in session here in Austin, the buzz has begun.  A number of potential bills, if filed and passed, would affect appellate practitioners dramatically.  Here is a summary of what could be on the agenda for this session:

• an amendment to the general interlocutory appeal statute authorizing appellate review of all controlling questions of law at the will of any party;
• an amendment to the Texas Arbitration Act providing for a meaningful appeal on questions of law or fact in arbitration proceedings;
• an omnibus court reorganization statute that would combine the Texas Supreme Court and the Court of Criminal Appeals or reduce the number of justices from 9 to 7 on each court;
• appellate redistricting (which could include the demise of the Corpus Christi, El Paso, and Texarkana appellate courts) and elimination of overlapping appellate districts; and
• providing the Texas Supreme Court with discretionary jurisdiction in appeals of all final judgments and appealable interlocutory orders.

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Today's State Bar Friday Update reports that the chief justices of all Texas appellate courts presented their budgets to the Senate Finance Committee yesterday.

The report also mentions that Chief Justice Jefferson will give the State of the Judiciary address at 11:00 a.m. on February 20, 2007.  This event will take place in the House Chamber and is open to the public.  A live audio link is available here.

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