HIGHLAND PARK IMMUNE FROM SUIT FOR DEATH OF OFFICER PERFORMING EXTRA-DUTY SECURITY SERVICE AT PRIVATE RESIDENCE

3 minute read

Town of Highland Park v. McCullers

Dallas Court of Appeals, No. 05-19-01431-CV (June 29, 2021)
Chief Justice Burns (Dissent linked here), and Justices Pedersen, III (Opinion linked here) and Goldstein (Concurrence linked here)

               The Town of Highland Park cannot be sued by the survivors of an off-duty police officer killed in a flash flood while providing security at a private residence through an arrangement coordinated by the Town, according to a divided Dallas Court of Appeals panel. 

        SMU police officer Calvin Marcus McCullers accepted an assignment offered by the Highland Park Department of Public Safety to provide after-hours security, at a property owner’s expense, for a private residence then under construction. A little more than two hours after he arrived at the property in his personal car, a torrential downpour flooded the area where he was parked and swept him and his car over an embankment into Turtle Creek. His body was discovered several weeks later on the banks of the Trinity River more than three miles downstream. 
        Officer McCullers’s survivors sued Highland Park and others for negligence and other torts. Asserting governmental immunity from such claims, Highland Park filed a plea to the jurisdiction, which the trial court denied after the parties conducted limited discovery. On interlocutory appeal, the core issue was whether coordinating a program to provide security services to private residences by off-duty police officers is an exercise of “police protection” and thus a governmental function for which the Town is generally immune from suit, or a “proprietary” function to which immunity does not apply. 
        The distinction between governmental and proprietary functions, which applies only to municipalities, is codified in the Texas Tort Claims Act, chapter 101 of the Civil Practice and Remedies Code. The TTCA defines proprietary functions as those “that a municipality may, in its discretion, perform in the interests of the inhabitants of the municipality”—but not including the list of 36 functions expressly identified as governmental functions. The first item on this list is “police and fire protection and control.” Justices Pedersen and Goldstein, in separate opinions, held “the Town’s coordination of Officer McCullers to provide law enforcement services” at the residence was an exercise of “the governmental function of police protection.” Justice Goldstein’s concurrence, elaborating on the statutory analysis, cited precedent that plaintiffs “may not split various aspects of a city’s operation into discrete functions and recharacterize certain of those functions as proprietary.” She concluded her opinion by noting “the ongoing struggle associated with judicial analysis and application of the governmental-proprietary dichotomy” and other aspects of governmental immunity. She urged the Legislature to provide “more certainty” on these issues for Texas citizens and governmental bodies. 
        Chief Justice Burns, dissenting, said his “colleagues rely on labels instead of function.” He denied that coordinating “private security services for private property owners,” so that an off-duty officer was “essentially functioning as a night-watchman for one citizen,” fits within the statutory meaning of “police protection.” Instead, applying the factors articulated by the Texas Supreme Court for breach-of-contract claims in Wasson Interests, Inc. v. City of Jacksonville (1998), he concluded that “in providing private security services” Highland Park “was acting in a proprietary role.” 
        One final note: finding the program is a governmental function does not necessarily end the immunity analysis. Under the TTCA, governmental immunity is waived in circumstances involving “personal injury or death caused by a condition or use of tangible personal or real property”—if the plaintiff complies with statutory notice requirements or the governmental entity has “actual notice” of the injuries and its potential liability. Justice Pedersen, extensively describing the record and controlling precedent, concluded plaintiffs failed to provide timely notice and rejected plaintiffs’ argument that Highland Park had actual subjective knowledge of its alleged fault in causing or contributing to the officer’s death. Justice Goldstein concurred in a footnote, while identifying the “actual subjective awareness” test as ripe for review by the Legislature. Chief Justice Burns did not mention this issue.  

SCOTx Holds Academy Sports Immune from Suit for Selling Assault Rifle Used in Sutherland Springs Mass Shooting

3 minute read

In re Academy, Ltd.

Supreme Court of Texas, No. 19-0497 (June 25, 2021)
Justice Lehrmann (Opinion, linked here), Justice Boyd Concurring (linked here)
        In November 2017, Devin Kelley shot 25 people to death, and wounded 20 more, in the First Baptist Church in Sutherland Springs, Texas. Kelley wielded a semi-automatic assault rifle he purchased from an Academy Sports store in San Antonio. Academy sold the rifle as part of a pre-packaged unit that included a 30-round large-capacity magazine (“LCM”), with a single SKU number and a single price for all components in the package. Kelley should not have been able to purchase the rifle, because he had been convicted of domestic assault in a military court-martial. But the Air Force failed to have that disqualifying conviction information entered on the Criminal Background Check System, and so that system green-lighted the sale when Academy ran the required check. The survivors and families of the victims of the shooting argued the sale shouldn’t have happened for a second reason: Kelley was a Colorado resident, and Colorado prohibits LCMs like that sold as part of the package bought by Kelley. In fact, another retailer—Dick’s Sporting Goods—had previously refused to sell to Kelley. But Academy interpreted the laws to allow this sale in Texas. So, Kelley got his gun. Survivors and families of victims sued the government in federal court for failing to enter the shooter’s conviction information on the background-check system. Holcombe v. United States, No. 5:18-cv-00555-XR (W.D. Tex.). And they sued Academy in state court for selling the gun-and-LCM package to the shooter, an out-of-state resident.
        In the state court case, Academy moved for summary judgment under the federal Protection of Lawful Commerce in Arms Act (“PLCAA”), which protects firearms retailers and manufacturers from certain claims arising out of the criminal conduct of gun purchasers. The trial court denied summary judgment, and the Fourth Court of Appeals refused to disturb that ruling. But the Texas Supreme Court granted mandamus and overturned that decision, finding the PLCAA did in fact bar the plaintiffs’ lawsuit against Academy.
        The Court rejected the plaintiffs’ arguments that their case fell within either of two exceptions to the PLCAA. First, the Court held the sale did not run afoul of the federal Gun Control Act, violation of which would fall within the “predicate exception” to the PLCAA. The Gun Control Act prohibits sales to out-of-state buyers unless “the sale, delivery, and receipt fully comply with the legal conditions of sale in both such States,” i.e., the state of sale and the state of the purchaser’s residence. There was no dispute it would not have been legal in Colorado for Kelley to buy the package he bought from Academy, containing the 30-round LCM. The Supreme Court, however, ruled that the Gun Control Act addressed only sales of “firearms” but not LCMs—even though, in this instance, the pre-packaged unit bought by the shooter contained both, and there could have been no “sale” of the “firearm” without the LCM. Second, it rejected application of the PLCAA exception for “negligent entrustment” claims, ruling that Texas does not recognize a claim for negligent entrustment based on the sale of a chattel, as opposed to temporary entrustment where the owner retains ultimate control. Finally, the Court concluded mandamus was appropriate because the PLCAA protected gun retailers and manufacturers from being subjected to lawsuits, rather than merely providing them a defense from liability—something that could have been addressed on appeal from a final judgment, rather by mandamus.
        For those disappointed Academy claimants who are also plaintiffs in the Holcombe lawsuit against the government, there may be a small silver lining in the Supreme Court’s decision. The government has designated Academy a “responsible third party” in that case, seeking to have the court allocate some of the responsibility for the shooting to Academy, based on the government’s contention that Academy did in fact violate federal and Colorado gun laws. If such responsibility were assigned to Academy, that would reduce the government’s own liability to the plaintiffs and, with it, the plaintiffs’ potential recovery. Now, however, there’s a chance the trial court in Holcombe will strike the designation of Academy as a responsible third party, based on the Texas Supreme Court’s decision. That, however, remains to be seen.

SCOT Holds Amazon Not Liable for Defective Products It Markets for Other Vendors

3 minute read

Amazon.com, Inc. v. McMillan

Supreme Court of Texas, No. 20-0979 (June 25, 2021)
Opinion by Justice Busby (linked here)
Dissent by Justice Boyd (linked here)

        Answering a question certified by the Fifth Circuit, the Texas Supreme Court held Amazon is not a “seller” under Texas product liability law when it does not hold title to the product but controls the process of the transaction and delivery through the “Fulfillment by Amazon” program.

        As discussed in a previous Sua Sponte post, the McMillan plaintiffs allege injuries to a 19-month-old child who swallowed a battery from a TV remote purchased on Amazon’s website. The listed seller was “USA Shopping 7693,” which Amazon traced to a vendor account owned by Hu Xi Jie—an individual or company that neither Amazon nor plaintiffs have been able to contact or serve. Amazon’s potential liability for the child’s injuries turns on whether it is a “seller” of the product under the Texas Products Liability Act, chapter 82 of the Civil Practice and Remedies Code. A federal district court held Amazon was a seller, i.e., “engaged in the business of distributing or otherwise placing” the product in the stream of commerce. The court certified its order for interlocutory appeal under 28 U.S.C. § 1292(b), and the Fifth Circuit submitted the issue to the Texas Supreme Court in January 2021.
        Fifth Circuit Judge (and former Texas Supreme Court Justice) Don Willett authored the opinion certifying the question, noting the Supreme Court’s “track record of resolving cases promptly.” Justice Busby’s opinion acknowledges the Fifth Circuit’s comment and responds in a footnote, “Challenge accepted.”
        The case focuses on a specific (albeit large) subset of Amazon transactions—products listed on the product-description and order-confirmation pages as “sold by” a vendor other than Amazon and delivered from Amazon warehouses through the “Fulfillment by Amazon” (FBA) program. These transactions differ from other purchases, including products listed as “sold by” and delivered by Amazon, products listed as “sold by” third parties and shipped directly to customers by the vendor, and products sold through other websites or stores and delivered through the FBA program.
        The Supreme Court’s construction of the Product Liability Act’s definition of “seller” is grounded in the presumption that “the Legislature uses statutory language with complete knowledge of the existing law and with reference to it.” (Quotation omitted.) Because the statutory definition is virtually identical to that of section 402A of the Second Restatement of Torts and Texas cases applying it, the Court concludes the statute “does not expand liability for those not considered sellers under common law.” Accordingly, the Court holds “Amazon is not a ‘seller’ under Texas law when it does not hold or relinquish title to an allegedly defective product.” It cannot, therefore, be liable as a non-manufacturing seller under the Product Liability Act.
        Justice Boyd, joined by Justice Devine, dissented, and would have answered the certified question “by holding that Amazon.com is a seller under [the statute] when it ‘controls the process of the transaction and delivery’ of a product through its FBA program, regardless of whether it ever holds title to the product.” This construction is compelled, said the dissent, by the plain meaning of the statute’s language when it was enacted in 1993. The dissent acknowledged the presumption that the Legislature was aware of case law when enacting a similar definition, but insisted “we may not presume that it was aware of what we would hold twenty-eight years later.”

Appraisal Based on Non-Comparable Sales Fails Reliability Test

2 minute read

Bank of Texas v. Collin Central Appraisal District

Dallas Court of Appeals, No. 05-19-00568-CV (June 22, 2021)
Justices Myers, Nowell (Opinion linked here), and Goldstein

        Bank of Texas appealed a judgment denying its challenge to CCAD’s tax appraisal of two properties. The bank argued the trial court abused its discretion by striking the bank’s appraisal experts for not properly applying the “income method,” one of three appraisal methods recognized by the Tax Code. The Dallas Court of Appeals affirmed, holding the trial court could reasonably have concluded “that the comparables relied on by the [bank’s] appraisers, rents for office buildings and retail properties, were not comparable to the property being valued, branch banks.” This “analytical gap” failed the reliability test articulated by the Texas Supreme Court in Gammill v. Jack Williams Chevrolet (1998) and its progeny.

        The appeals court rejected the bank’s argument (a common refrain of proponents of expert opinions) that CCAD’s complaints went “to the weight of the evidence, not its admissibility.” The court explained that whether an “appraisal is based on non-comparable sales is an issue for the trial court in determining admissibility,” and thus within its discretion. The appeals court also rejected the notion that “real estate appraisers are unique and somehow different from other experts; that their testimony is for the jury and not subject to reliability requirements.” To the contrary, the court said, “Courts must act as gatekeepers of expert testimony; appraisers do not get a free pass.”

Abandoning Prior Acceleration Avoids Statute of Limitations on Foreclosure

2 minute read

Florey v. U.S. Bank, N.A.

Dallas Court of Appeals, No. 05-20-00306-CV (June 22, 2021)
Justices Osborne, Reichek (Opinion, linked here), and Nowell

        Where a borrower defaults on a loan secured by real estate and the noteholder accelerates that loan, foreclosure must occur within four years after acceleration—unless the noteholder abandons that acceleration, which resets the limitations clock.

        The Floreys defaulted on their home equity loan. Nationstar Mortgage, the holder of the note, sent the Floreys a notice of default and then a notice accelerating the debt, both in 2013. But for many months after those notices, Nationstar said nothing further about acceleration and continued to send the Floreys monthly mortgage statements seeking only the current and past due amounts rather than the full amount of the loan, and even offering them the option to pay off the loan with no “prepayment penalty.” Those monthly notices made no reference to the acceleration. In August 2017, Nationstar filed an application for expedited foreclosure under Tex. R. Civ. P. 736, expressly relying on the 2013 notice of default, but not the notice of acceleration. But the trial court denied that application, and Nationstar then sold the note to U.S. Bank, which in 2019 sent the Floreys a new notice of default and acceleration and again sought to pursue expedited foreclosure under Tex. R. Civ. P. 736. The Floreys opposed that request and sought to quiet title, arguing that “U.S.Bank’s attempt to foreclose the lien was not timely brought within the four-year limitations period” and “[b]ecause the limitations period had expired, … the lien was no longer valid.” The trial court, however, granted summary judgment to U.S. Bank and the Court of Appeals affirmed. 
        “The pivotal issue,” the appeals court said, was “whether the 2013 acceleration of the Floreys’ note [by Nationstar] was abandoned.” If it was, then “the contract [was] restored to its original condition, including restoring the loan’s original maturity date and resetting the statute of limitations.” “Once a debt has been accelerated, the note holder may unilaterally waive or abandon the acceleration so long as the borrower neither objects to the abandonment nor detrimentally relied on the acceleration. … Abandonment can occur either expressly through a clear repudiation of the right, or impliedly through conduct inconsistent with a claim to the right.” Where the facts are undisputed, whether acceleration has been abandoned is a question of law. Here, Nationstar’s repeated monthly notices, sent after its notice of acceleration, that sought only monthly payments and made no mention of acceleration—and in fact, were inconsistent with acceleration—were sufficient to establish Nationstar’s abandonment of the 2013 acceleration. The foreclosure limitations clock, therefore, was re-set and didn’t start ticking again until U.S. Bank served its own notices of default and acceleration in 2019. U.S. Bank’s foreclosure, therefore, was not time-barred.

No Implied Ratification Where Contract Required Express Written Consent

2 minute read

BPX Operating Company v. Strickhausen

Supreme Court of Texas, No. 19-0567 (June 11, 2021)
Justice Blacklock (opinion available here)
Justice Boyd Dissent (available here)

        Ms. Strickhausen’s mineral lease with BPX prohibited pooling her tract with others without her “express written consent.” Nevertheless, BPX pooled several tracts, including Strickhausen’s property, to create a 320-acre unit. Unlike Strickhausen’s lease, her neighbors’ leases permitted pooling. BPX attempted to obtain Strickhausen’s written consent or ratification of the pooling, but Strickhausen consistently refused and repeatedly objected to BPX’s activity. As the parties continued to communicate and discuss a settlement or other resolution, BPX began paying Strickhausen pooled royalties rather than on a “tract participation basis.” When Strickhausen finally sued BPX for breach of contract, BPX alleged Strickhausen had ratified the pooling by cashing her royalty checks. The trial court granted summary judgment in favor of BPX, but the San Antonio Court of Appeals reversed.

        In a 5-4 decision, the SCOTX sided with the appellate court and Strickhausen. The Court acknowledged that acceptance of royalty checks can, in some circumstances, constitute implied ratification. But it noted that Strickhausen—unlike her neighboring lessors and the lessors in prior cases—bargained for a lease that strictly prohibited pooling “under any circumstances” without her “express written consent.” “[A]ll her subsequent actions should be examined in light of both parties’ knowledge of this element of their agreement. A party armed with a lease prohibiting pooling without express, written consent should have less reason to worry about mistakenly giving her implied, unwritten consent than does a party not protected by such a clause.” The communications between the parties also demonstrated that Strickhausen was not consenting to the pooling and was actively trying to reach a settlement agreement with BPX. Strickhausen’s acceptance of royalty checks held less weight than it might in other cases because Strichhausen was entitled to significant royalties with or without pooling. The Court held she reasonably could have viewed the checks as payment towards what she believed she was owed without pooling.
        The majority brushed off the dissent’s conclusion that “actions may speak louder than words,” holding that, on questions of contractual intent, “words matter a great deal—especially words in a written agreement that disavows implied unwritten agreements.”
        The dissent disagreed. It would have held that Strickhausen’s actions in accepting royalty payments that she should have known were calculated based on production from the pooled unit spoke louder than her words, despite the language of the contract and her prior protests.