This morning, the Third Court of Appeals issued an opinion clearly setting forth the extent to which a division of the state waives sovereign immunity when it sues a private party. In this case, the State of Texas sued a traffic light manufacturer for breach of contract, breach of warranty and quantum meruit. The traffic light company counterclaimed for business disparagement, and the State filed a plea to the jurisdiction with respect to the counterclaim, asserting sovereign immunity. The trial court (Judge Billy Ray Stubblefield in Williamson County) denied the plea, and this interlocutory appeal followed. The State made a number of arguments as to why it should have immunity against counterclaims in a lawsuit it initiated, but ultimately they all failed. The bottom line, according to the Third Court of Appeals, is that when the State files a lawsuit, the defendant has the right to assert any and all germane defenses, even counterclaims. Since the company’s business disparagement tort claims involve the same issues as the State’s breach of contract claims, the state waived its immunity when it brought the contract claims. The opinion, written by Justice Puryear, does a good job of laying out general sovereign immunity analysis and provides a thorough review of the cases on this specific issue, that is when and how the State waives immunity by filing suit. State of Texas v. Precision Solar Controls, Inc., Cause No. 03-04-00632-CV Technorati Tags: litigation, Third Court of Appeals, law

This morning, in addition to the arbitration case we’ve already discussed, the Texas Supreme Court issued an opinion in a judicial disqualification case, to which Justice Hecht dissented. As the court succinctly summarizes its holding: the question presented here is whether an appellate judge is disqualified because, unbeknownst to her, before she took the bench another attorney at her very large firm played a very small role in the early stages of this appeal. For the reasons discussed below, we hold that she is, and thus reverse and remand for further proceedings. Technorati Tags: litigation, Texas Supreme Court, law

This morning, the Texas Supreme Court issued another mandamus opinion compelling arbitration in the face of a trial court and court of appeals refusal to do so. This time the case involves a claim for tortious interference of contract. James Cashion was an insurance salesman; he signed an agency contract with a health insurance carrier that contained an arbitration clause. The carrier cut Cashion’s commissions and eventually terminated his agent status, apparently pursuant to its sale to another insurance company. Mr. Cashion sued the purchasing insurance company for toriously interfering with his contract with the first carrier. The Supreme Court notes from the beginning that the essence of a tortious interference claim is that the interfering defendant must in fact not be a party to the contract. However, according to the Supreme Court, the interfering defendant here could compel arbitration based on a contract to which it could not have been a party. The Court’s rationale for this stems from the relationship between the various parties. Since the tortious interference defendant ultimately purchased the party with which the plaintiff had the contract, the Court uses something like agency analysis to allow the tortious interference defendant to take advantage of the first carrier’s contract with Cashion (notwithstanding the fact the the purchase of the insurance company was presumably the event that triggered the interference in the first place). The Court writes: We agree with Cashion that he would not be required to arbitrate a tortious interference claim against a complete stranger to his contract and its arbitration clause. But he did not sue any strangers here; every defendant is a current or former owner, officer, agent or affiliate of States General, with whom he agreed to arbitrate these disputes. With all due respect, this seems to be a distinction without a difference. Presumably, a “complete stranger to a contract” will not tortiously interfere with it. While some separation from the contract is required for the cause of action to be available, the act of interfering with the contract would logically require some connection to exist. People don’t just randomly tortiously interfere with contracts; there is usually, I would think, a reason, such as a company’s desire to purchase another company but not honor its contracts with its employees. In other words, it seems difficult to imagine a scenario whereby a party toriously interferes with a contract but would not be able to take advantage of the contract’s arbitration clause, under the standard introduced today. Finally, in an attempt to avoid arbitration, Cashion argued that by litigating for two years before filing a motion to compel arbitration the insurance company waived its right to compel arbitration. The Court notes that the discovery conducted by Cashion would be useful in the arbitration proceeding, and that even though Cashion had expended $200,000.00 in legal fees in litigation, the record does not demonstrate that the litigation had proceeded to the extent necessary for waiver. In RE Vesta Insurance Group, et al., Cause No. 04-0141

Last Friday, the Texas Supreme Court issued two opinions, neither of which has anything to do with the law of arbitration. The first opinion discusses whether or not a city can be estopped from enforcing a zoning ordinance when its building official, unaware of the ordinance, mistakenly issued a permit which would have allowed construction in violation of the ordinance. In this case, and in all but “exceptional” cases according to the Court, the answer is no. City of White Settlement v. Super Wash, Inc., Cause No. 04-0340 The Court also issued an opinion discussing forcible detainer actions and supersedeas bonds and whether these sort of things become moot if the tenant in question’s lease expires while her appeal is pending. Theresa Marshall v. Housing Authority of the City of San Antonio, Cause No. 04-0147 Technorati Tags: arbitration, Texas Supreme Court, law