Perhaps less likely to come up than the situation in this morning’s other Texas Supreme Court opinion, the Court also addressed the scope of Texas’ antitrust statute (the Texas Free Enterprise and Antitrust Act of 1983) this morning. The Coca-Cola Company v. Harmar Bottling Company, ___ S.W.3d ___ (Tex. 2006) (Cause No. 03-0737).

As an initial matter, we would like to apologize for our absence for the last month and a half. From time to time the actual practice of law interferes with the blogging. We’ve been extremely busy for the last month or so, which is good, but which also prevented us from blogging. For a variety of reasons, however, things are more or less back to normal now. Which is a good thing, because this morning the Texas Supreme Court released two opinions, one of which apparently changes Texas law with respect to the enforceability of covenants not to compete in the at-will employment context. The opinion discusses the history of Texas jurisprudence on the subject, as well as the legislative history of the Covenants Not to Compete Act. Obviously, it will be required reading for anyone who practices in the employment or commercial litigation areas. Alex Sheshunoff Management Services, L.P. v. Kenneth Johnson and Strunk & Associates, L.P., ___ S.W.3d ___ (Tex. 2006) (Cause No. 03-1050). Technorati Tags: litigation, Texas Supreme Court, law

This morning, the Third Court of Appeals, sitting en banc on a Motion for Rehearing, issued an opinion holding that certain language in the Texas tax code which uses the word “may” is in fact mandatory, such that a successful Texas property tax protestant has an entitlement to his, her or its attorneys’ fees in making the protest. The opinion, which replaces an older opinion blogged about quite briefly here, addresses a split amongst Texas courts of appeals on the issue. Justice Patterson dissented, writing that the en banc majority “eviscerated” a distinction which ought to have given the trial court discretion on the issue. We don’t do tax law, and we would not presume to blog about it, but the opinion is an important one in that it addresses a common question of statutory construction. The opinion discusses the general rule in Texas, which is that statutory language that says “a court may award fees” means that the court has discretion to award them or not, but language that says “a prevailing party may recover fees” means that the party is entitled to fees and thus the court is without discretion on the matter. See Bocquet v. Herring, 972 S.W.2d 19 (Tex. 1998). The section of the tax code at issue here reads somewhere in between, according to the Court: “A property owner who prevails in an appeal to the court under Section 42.25 or 42.26 may be awarded reasonable attorney’s fees.” Tex. Tax Code §42.29. The Court engages in a detailed discussion of the Legislature’s use of the passive voice (which is probably better left for someone like Wayne Schiess to discuss) and ultimately decides that in the Third Court of Appeals, anyway, the attorneys’ fee award is mandatory. It is our rank speculation, based on anecdotal evidence (i.e. complaints from friends, personal experience and an article in the Austin-American Statesman), that the Travis Central Appraisal District, the defendant here, has recently gotten much more aggressive in its appraisals, at least in the personal property area (my own home’s appraisal went up roughly one-third this spring). Given that speculation, this issue may be one to watch. Aaron Rents v. Travis Central Appraisal District, ___ S.W.3d ___ (Tex. App. – Austin, 2006) (en banc) (Cause No. 03-05-00171-CV). Technorati Tags: litigation, Third Court of Appeals, law

Yesterday, the Fifth Circuit handed down an opinion stemming from a Mississippi case (link is to .pdf file) weighing in on the notion that prohibitive expense of arbitration can be a basis for a court’s refusal to compel arbitration on unconscionability grounds. The Court reversed the district court refusal to compel arbitration in this case, finding that the party seeking to avoid arbitration (a chicken farmer named Gertrude Overstreet) proved that she was destitute now, but did not offer evidence of her financial condition back at the time she entered into the contract that contained the arbitration clause. The legal question at issue all started with a U.S. Supreme Court case from 2000 where that Court noted that “the existence of large arbitration costs could preclude a litigant . . . from vindicating her federal statutory rights in the arbitral forum.” Green Tree Fin. Corp. – Alabama v. Randolph, 531 U.S. 79, 90, 121 S.Ct. 513, 522 (2000) (otherwise known as ‘the other Green Tree case, so as not to confuse it with the more famous Green Tree opinion where the Supreme Court wrote about class actions in arbitration). While the Supreme Court did not allow that Green Tree plaintiff to avoid arbitration, it held that avoidance was theoretically possible if the unconscionable costs could be properly proven. Typically, this has since been done by focusing on how much the arbitration in question would cost. The Texas Supreme Court has subsequently acknowledged that substantial costs and fees associated with the arbitral forum can render an arbitration agreement unconscionable. In re: FirstMerit Bank, NA, 52 S.W.3d 749, 756 (Tex. 2001). Guest blogger Rick Freeman has blogged about this issue before on this blog. Rick’s post discussed the Johnny Luna case out of Houston, where the Texas First Court of Appeals held that arbitration would be unconscionable because of its extreme costs, especially considering the amount of money at stake. That case has now been argued before the Texas Supreme Court, so we should get a ruling from that court at some point on this very issue. The Fifth Circuit, however, beat the Texas Supreme Court to the punch yesterday. Applying Georgia law, the Circuit found that unconscionability analysis must consider the conditions between the parties as they existed at the time of the contract, and not at the time of the potential arbitration. The Circuit glossed over the evidence that Ms. Overstreet’s arbitration would cost $29,000.00 and that Ms. Overstreet had no income or property and subsisted on food stamps; instead, the Court noted that Ms. Overstreet provided no evidence that she was poor back in 2001, when she entered into the contract with the arbitration clause, and thus she had not met her burden to establish unconscionability. Texas law on unconscionability seems similar to Geogia law (as qupted by the Fifth Circuit) on this question of when in the parties’ economic relationship unconscionability must be evaluated: In any event, the basic test for unconscionability is whether, given the parties’ general commercial background and the commercial needs of the particular trade or case, the clause involved is to one-sided that it is unconscionable under the circumstances existing when the parties made the contract. The principle is one of preventing oppression and unfair surprise and not of disturbing allocation of risks because of superior bargaining power. In re: FirstMerit Bank, NA, 52 S.W.3d 749, 757 (Tex. 2001) (emphasis added). Therefore, it seems clear that Texas practitioners asserting the high cost of arbitration as a basis for avoiding arbitration must now prove up their clients’ economic status at the time of the contract’s execution, as opposed to at the time of the arbitration. Finally, a curious thought: all of this is an issue because arbitration is terribly expensive. Suppose, in the future, the AAA cuts its fees dramatically and makes arbitration as inexpensive as the court system. Could a future litigant still urge that 2006 arbitration clauses should be avoidable on cost grounds, since back at the time of execution arbitration was still expensive? Based on today’s Fifth Circuit analysis, I would think the answer should be yes. Overstreet v. Contigroup Companies, Inc., ___ F.3d ___ (5th Cir. 2006) (Cause No. 05-60953) Technorati Tags: arbitration, ADR, Fifth Circuit, law