I N S I D E Greg Abbott: A Blueprint for Growth T

Texas is a jobs-creating machine and Texans arethe force that powers it. I will be the Governorwho keeps it that way.

I know I am preaching to the choir when I tell youjobs grow where free enterprise flourishes and govern-ment is restrained. Legal reforms enacted with the sup-port of the Texas Civil Justice League have helped Texaslead the nation in job creation, in oil and natural gasproduction, in exports and more.

Less government, low taxes, smarter regulations andright-to-work laws—not government mandates—theseare the pro-growth economic policies that help freeenterprise flourish here, that help businesses expandhere and that attract more major employers to Texasevery day from states that over-tax and over-regulate.

One CEO shared with me his reasons for relocatinghis business to the Dallas area. He told me regulationsin California were out of control, taxes there were toohigh and unions had “virtually hijacked the state.” Helooked at every state and, in looking at bottom line, hechose Texas. But what he did not realize until he gothere is that there is something far more valuable aboutTexas, something he and his family had never experi-enced: the true sense of freedom Texans enjoy.

That freedom also means more Texas entrepreneursare willing to risk their capital to invest in themselvesand others by opening businesses large and small.

Texas is exceptional, but there is more we can do. There is more I will do as Governor to build a Texas

that is better, brighter and stronger.I have crafted a blueprint for a new era of economic

expansion in Texas. My plan invests in the tools of self-sufficiency—

quality schools, more roads and abundant water—and empowers both businesses and individuals byfocusing on reducing taxes and regulations and onspeeding the permitting process. My plan controlsthe growth of government in order to stimulate theprivate sector, so jobs continue to grow and wagescontinue to rise for even higher standards of livingacross the state.

As Governor, I will continue to fight for the integrityand vitality of our electoral process. And as vacanciesoccur, I will appoint impartial, qualified and knowl-edgeable judges who exercise judicial restraint andrespect the rule of law.

I invite you to read all of my plans atwww.TexasBlueprint.com.

Working together, we will keep Texas growing.

Greg Abbott is the Texas Attorney General andRepublican gubernatorial candidate. �

Fall 2014

I N S I D E

Jack Dillard Retires from Altria . . . .3

TCJL 27th Annual Meeting . . . . . .4-5

What’s on the Web? . . . . . . . . . . . . .6

TCJL PAC Judicial Endorsements . .7-8

TCJL Judges Project for 2014 Primary . . . . . . . . . . . . . . .7

Upcoming Events . . . . . . . . . . . . . . .8

TCJL Amicus Report . . . . . . . . . .9, 12– Asbestos Causation– Statute of Repose– Stowers Claims– Government Standards– Post-employment Benefits– Non-Resident Defendants– Negligent Hiring– Contractual Torts

Letters of Protection: Emerging Litigation . . . . . . . . . . . .10

Texas Railroad Commission Proposes Common Carrier Pipeline Permitting Rule . . . . . . . .10

U.S. Fifth Circuit Strikes Down Expenditure Limit . . . . .11, 15

SCOT Hears Arguments in Deepwater Horizon Case . . . . . . . .12

Sovereign Immunity in Construction Contracts . . . . . . .13, 15

Duncan Named Chancellor of Texas Tech . . . . . . . . . . . . . . . . . .14

Texas Civil Justice League 28th Annual MeetingThursday, November 6, 2014 • 3:00 – 6:00

Moody Bank (formerly Wells Fargo) Tower Auditorium • 400 W. 15th Street, 3rd Floor • Austin, TX 78701

Details may be found at www.tcjl.com • Please RSVP to [email protected]

Greg Abbott: A Blueprint for Growth

Attorney General Greg Abbott

TCJL Journal Fall14_TCJL Journal Fall 14 10/15/14 10:48 AM Page 1

2 Texas Civil Justice League Journal Fall 2014

S TA F FCarol Sims

Executive DirectorLisa Kaufman

General CounselGeorge Christian

Senior CounselAnnette MitroszProject/Event ManagerLauren Sides

Social Media CoordinatorAlicia Glover

Comptroller

A D V I S O R SWalter FisherShannon Ratliff

B OA R D O F D I R E C T O R SJohn W. Fainter

Association of Electric Companies of TexasTCJL Executive Committee – Chairman of the Board

Hector RiveroTexas Chemical Council

TCJL Executive Committee – Vice Chairman of the BoardBill OswaldKoch Companies

TCJL Executive Committee – SecretaryBo Gilbert

USAATCJL Executive Committee - Treasurer

Jeff BonhamCenterPoint Energy

TCJL Executive CommitteeJay Gibson

Dow Chemical CompanyTCJL Executive CommitteeLouis J. GoodmanTexas Medical AssociationTCJL Executive CommitteeRichard Jackson

Texas Restaurant AssociationTCJL Executive CommitteeRobert W. Jones

Pfizer, Inc.TCJL Executive CommitteeTravis Kessler

Texas Assn. of RealtorsTCJL Executive CommitteeRobert Levy

Civil Justice Reform Group & ExxonMobil

TCJL Executive CommitteeRobert LooneyTexas Oil & Gas Assn.

TCJL Executive CommitteeBennett SandlinTexas Municipal LeagueTCJL Executive Committee

Tom SellersConocoPhillips

TCJL Executive Committee

George B. AllenTexas Apartment Assn.

Gary BarrettBayer Healthcare

Russell Bridges3M

Dave CagnolattiPhillips 66

Michael ChatronAssoc. General Contractors - Texas Building Branch

John ClausenState Farm Insurance

Jayme CoxShell Oil Co.

Eric DonaldsonAltria Client Services

Frank GalitskiFarmers Insurance Group

Jonna Kay HamiltonNationwide Insurance

Diane HirschValero Energy Corp.

Walt JordanOncor Electric

Sherman “Tiger” JoyceAmerican Tort Reform Assn.

Dennis KearnsBNSF Railway

Gaspar X. LacaGlaxoSmithKline

Steve PerryChevron

Richard PonderJohnson & Johnson

Julio ReyesAEP Texas

Leslie WardAT&T

Tim WattZachry Corp.

E X O F F I C I ORed McCombsMcCombs Enterprises

Ralph WayneRuben Martin

Martin Resources

TEXAS CIVIL JUSTICE LEAGUE400 West 15th Street, Suite 1400

Austin, TX [email protected]

TEXAS CIVIL JUSTICE LEAGUE


Fall 2014 Texas Civil Justice League Journal 3

Jack Dillard Retires from AltriaTCJL & TTARA thank him for his many years of service to TCJL and the Texas Taxpayers & Research Association

Bill Oswald, Rob Looney

Eric Donaldson, Betsy Giles, Jack Dillard

Walter Fisher, Lisa Kaufman, Jack Dillard

Jack Dillard, Ralph WayneRalph Wayne, Carol Sims, Jack Dillard

Betsy Christian, George Christian, John Fainter, Lisa Kaufman, Jack Dillard, Dale Craymer



TCJL 27th Annual Meeting

Bill Oswald, Walter Fisher, John Fainter Rep. Four Price

Gary Barrett, Dave Cagnolatti

Honorable Bill Stoudt, Kerry Cammack

Jay Gibson, Richie Jackson

Dr. John Coppedge

Gary Barrett, Dave Cagnolatti, Rob Looney

Lisa Kaufman, Bill Oswald, Jayme Cox



November 7, 2013

Legislator of the Year Award Recipients:

Senator Juan “Chuy” HinojosaRepresentative Doug MillerRepresentative Four Price

Representative Kenneth SheetsRepresentative Myra Crownover

Representative Travis ClardyRepresentative Tryon Lewis

Julie Klumpyan, Victoria Waddy

Rep. Travis Clardy, Carol Sims, Justice Jeff Brown

Lisa Kaufman, Hector Rivero

Rep. John Raney, Kevin Yeary Richie Jackson, George Christian

Hon. Bud Kirkendall, Hon. Barbara Walther, Hon. Bert Richardson, David Newell, Kevin Yeary Rep. Myra Crownover



wwwtcjl.com

“What’s on the Web?”

• Up-to-date articles and information of interest• Legislative resources and summaries• Amicus briefs

• TCJL staff and board information• TCJL publications back to 1988

tcjlpac.com

• Up-to-date articles and information of interest• Calendar for all political events, fundraisers,

elections, session info, etc• TCJL PAC endorsements & press releases• Judges, including a link to judicial candidate

comparison on texasjudges.org

• Full details on races and candidates for:– Statewide– Senate– House

texasjudges.org

• Up-to-date articles and information of interest• Information on judges and judicial candidates for:

– Supreme Court of Texas– Texas Court of Criminal Appeals– Texas District Courts of Appeals– Texas Court Structure– Judicial Elections History

• Details on races and candidates for the abovecourts, plus district court races

• Comparisons of 2014 Judicial Candidates

jobsfortexaspac.com

J F TJOBSPAC

POLITICAL ACTION COMMITTEE J FJ TF T J F

PO T POLITICAL J TF

OMMITTEECTION CPOLITICAL A T

OMMITTEE

• Up-to-date articles and information of interest• Comparisons of Supreme Court Judicial Candidates for 2014• JOBSPAC Endorsements

@tcjl86

facebook.com/tcjl86



Three Texas Supreme Court justices,including recently appointed ChiefJustice Nathan Hecht, have credible

Democratic opponents in the upcomingNovember election.

Chief Justice Hechtfaces El Paso DistrictJudge Bill Moody, who ismaking his fourth cam-paign for a seat on thehigh court, andLibertarian candidate TomOxford. Moody’s mostrecent attempt in 2010 ended in his substan-tial defeat at the hands of incumbent JusticeDon Willett. Chief Justice Hecht is seeking afull six-year term. The Chief Justice overcamea dangerous challenge from former State Rep.Robert Talton in the GOP primary. TCJL PACEndorsement: Chief Justice Nathan Hecht.

Governor Perry’s mostrecent appointee to theCourt, Justice Jeff Browndefeated attorney JoePool in the Republicanprimary and will facelongtime Court ofCriminal Appeals JudgeLarry Meyers in November. One of the firstRepublicans to be elected to a statewidejudicial office, Judge Meyers switched partiesin order to challenge Justice Brown for Place6 on the court. There is also a Libertariancandidate in the race, Mark Ash. TCJL PACEndorsement: Justice Jeff Brown.

In Place 7, Justice Jeff Boyd has threeopponents: 13th Court of Appeals JusticeGina Benavides, Libertarian Don Fulton, andGreen Party candidate Charles Waterbury.Justice Boyd was unopposed in the GOP pri-

mary. Of the four races,Justice Boyd’s may be thetoughest, given JusticeBenavides’ experience and ability to raise fundsfrom the trial bar. We cannot afford to let this race slip between the cracks. TCJL PACE Endorsement: Justice Jeff Boyd.

After prevailing in abruising primary cam-paign, Justice PhilJohnson faces onlyLibertarian and GreenParty challengers RobertKoelsch and Jim Chisolmin November. TCJL PACEndorsement: Justice PhilJohnson. �

TCJL PAC Endorses Appellate Court CandidatesGiven the relatively few cases the Texas Supreme Courthears each year, Texas’ fourteen courts of appeals act as thecourt of last resort for virtually all appeals of civil and crim-inal matters. As a practical matter, consequently, the judi-cial system is only as good as the appellate justices we electeach election cycle. Since its inception in 1986, TCJL hasstriven to raise voter awareness of the critical function ofthe courts of appeals in our system of government and theimportance of carefully vetting courts of appeals candi-dates. At the same time, the TCJL PAC conducts its ownreview of these candidates and issues endorsements foreach primary and general election in which contestedcourts of appeals races occur.

For the November 4 general election, the TCJL PACendorses the following candidates:Chief Justice, Third Court of Appeals (Austin): Justice Jeff Rose (R)Place 6, 13th Court of Appeals (Corpus Christi):Justice Dori Contreras Garza (D)(I)Chief Justice, 14th Court of Appeals (Houston): Justice Kem Frost (R)(I)Place 7, 14th Court of Appeals (Houston): Justice Ken Wise (R)(I)Chief Justice, 4th Court of Appeals (San Antonio):Justice Sandee Bryan Marion (R)

TCJL PAC Endorsements for Texas Supreme CourtChief Justice Hecht, Justices Brown and Boyd Face November Challenges

Chief JusticeNathan Hecht

Justice Jeff Brown Justice Jeff Boyd

Justice Phil Johnson

TCJL Judges Project for 2014 PrimaryDuring the spring primary campaign, TCJL launched a statewide votereducation and get-out-the-vote campaign to encourage voter participa-tion in the Republican primary. The voter education project indisputablyand significantly increased voter retention for the Texas Supreme Courtand other judicial races (see data below). In addition to boosting theabsolute number of primary voters who stayed with the ballot, the dataindicates that the growth in voter participation in judicial races can bedirectly linked to TCJL’s primary campaign message that courts have a major impact on the daily lives and businesses of voters and that experienced judges are vital to the proper operation of the court system.This unprecedented result could not have occurred without TCJL’s significant involvement.• In 2010, of the 1,484,542 voters in the Republican primary, 25.5% of

those in the ballot booth did NOT vote in the judicial races;• In 2012, of the 1,449,477 voters in the Republican primary, 21.7% of

those in the ballot booth did NOT vote in the judicial races;• In 2014, of the 1,310,263 voters in the Republican primary, only 10.7% of

those in the ballot booth did NOT vote in judicial races.

As this analysis indicates, votes cast in 2014 Supreme Court primaryraces increased 11-14% over the two previous cycles. TCJL’s participationin these races clearly made a decisive difference in the outcome.

This fall TCJL will continue its efforts to educate voters about the impor-tance of judicial elections and the vital necessity of maintaining an expe-rienced and well qualified judiciary. Please help us to get the word outthrough your support of TCJL and the TCJL PAC.



Although the TCJL PAC rarely partici-pates in elections at the trial courtlevel, three races for district court

benches warrant exceptions to the rule.Consequently, TCJL PAC has endorsedDistrict Judge Jaime Tijerina for the 92ndDistrict Court in Hidalgo County, DistrictJudge Patricia Kerrigan for the 190th Districtin Harris County, and former District JudgeReneé McElhaney for the 150th DistrictCourt in Bexar County.

In the 92nd District Court, Judge Tijerina(R)(I) has drawn opposition from attorneyLuis Manuel Singleterry (D). Judge Tijerina,who Governor Perry appointed to the benchlast year, is one of the finest young trialjudges in the state. A Lieutenant Colonel inthe U.S. Army Reserves, he has served toursof duty in both Iraq and Afghanistan. Prior togoing on the bench, he also served as theelected County Attorney of Kenedy Countyand has practiced law in South Texas since1995. Judge Tijerina received his BBA fromthe University of Texas Pan American and hislaw degree from Texas Southern University.This race is of tremendous importance to the

judiciary in South Texas and the state as awhole. We cannot allow partisan politics tosweep out someone with Judge Tijerina’sexceptional experience, integrity, and char-acter.

One of the few Republican judicialincumbents to buck the Democratic tide inHarris County, Judge Kerrigan (R)(I) hasonce again drawn an opponent with no judicial and little if any trial experience.Appointed by Governor Perry to the districtbench in 2007, Judge Kerrigan won electionto the unexpired term in 2008 and to a fullterm in 2010. She has won every bar pollsince, and the Houston Press named her thebest civil trial judge in Harris County. Boardcertified in personal injury trial law, JudgeKerrigan is the first woman to serve asPresident of the Texas Association of DefenseCounsel and the Association of Defense Trial Attorneys. She has been active in theState Bar of Texas (serving as Chair of thePattern Jury Charge Committee), as well asthe Texas and Houston Bar Foundations.Judge Kerrigan is one of the best and mostexperienced trial judges in the state, and

her re-election to the bench is essential.Judge McElhaney (R) faces Democratic

challenger Edna Elizonda for the open 150thDistrict Court in San Antonio. Previouslyappointed by Governor Perry to the 73rdDistrict Court, Judge McElhaney lost herbench in the 2012 Democratic courthousesweep in Bexar County. During her time onthe bench, she presided over a generaldocket consisting of all types of civil matters,from family law to commercial matters. Prior to her appointment to the bench,Judge McElhaney practiced trial and appel-late law with Fulbright & Jaworski and CoxSmith and is currently a litigation partner inBeirne, Maynard & Parsons, LLP. A graduateof St. Mary’s University School of Law, shetaught public school for nine years beforeentering the legal profession. She is active in education, legal, and community organi-zations in Bexar County, teaches law at St. Mary’s, and has authored hundreds ofpapers for continuing legal education seminars. She is board certified in appellatelaw. We need to put Judge McElhaney backon the bench. �

TCJL PAC Endorses in Three State District Judge Races

2014 Election Dates

October 20-31, 2014: Early Voting Period

November 4, 2014: General Election

84th Texas Legislature

January 13, 2015: 84th Texas Legislative Session Convenes

June 1, 2015: 84th Regular Session Ends, Sine Die

U P C O M I N G E V E N T S

ATRA Annual Conference for State Coalition LeadersAmerican Tort Reform Association

November 10-12, 2014Marriott Coronado Island Resort & Spa

San Diego, CaliforniaCLE Credit

For Registration Information, Please ContactGeneva [email protected]

ORMatt Fullenbaum

[email protected]



As a service to our members, TCJL pro-vides amicus curiae support in impor-tant cases before state and federal

appellate courts. Over the past two years,TCJL has written briefs in 16 cases before theTexas Supreme Court, one case in the UnitedStates Supreme Court, and one case in theFlorida Supreme Court. When a TCJL mem-ber requests amicus support in a pendingappellate matter, TCJL reviews the issues inthe particular case to assess their potentialimplications for the TCJL membership as awhole, not just a single industry or business.If we determine that the case raises signifi-cant concerns to our membership, we thenconsider whether, based on TCJL’s nearly 30years of experience in legislative and judicialissues, we believe we have somethingunique to say to the court. Only if we deter-mine that we can offer a perspective that noother organization can provide do we dedi-cate our members’ resources to researchingand writing in the case.

We have summarized below some recentdecisions in cases in which TCJL partici-pated as an amicus. All of TCJL’s amicusbriefs are available for review on the TCJLwebsite.

Substantial Causation in AsbestosMesothelioma CasesIn perhaps the most highly anticipated casethis year, in July the Texas Supreme Courthanded down a 6-3 decision in Bostic v.Georgia-Pacific Corporation. TCJL filed anamicus brief concurring with Georgia-Pacificthat the Fifth Court of Appeals properly con-strued and applied the Texas SupremeCourt’s holding in Borg-Warner Corp. v.Flores, 232 S.W.3d 765 (Tex. 2007) withrespect to substantial factor causation in anasbestos-related mesothelioma claim. TCJL’samicus letter focused on the Petitioners’claim that the Legislature in 2009 attemptedto repeal lower court interpretations of Borg-Warner, and that this attempt evidenced“profound confusion” regarding the properapplication of the substantial factor test laiddown in that case. TCJL argued to the con-trary that Petitioners’ characterization of theLegislature’s involvement in the issue wasseriously misleading. The Court held thatBorg-Warner’s substantial causation require-ment, which requires that the plaintiff offerlegally sufficient proof of the approximate

dose of asbestos fibers from a specific defen-dant, applies equally in asbestosis andmesothelioma cases.

Statute of Repose for Engineers and ArchitectsIn Occidental Chemical Corporation v. JasonJenkins, TCJL has filed an amicus brief withthe Texas Supreme Court supportingOccidental Chemical’s Petition for Review.The brief argues that the First District Courtof Appeals erred in reversing the trial court’sdetermination that the Respondent’s claimwas barred by Texas’s ten-year statute ofrepose for engineers who design, plan, andinspect improvements to real property. If theCourt of Appeals’ decision is permitted tostand, it will effectively nullify the statuteand subject engineers to continuing andindefinite liability for alleged design defects.In addition to having the potential to sub-stantially raise the cost of engineering serv-ices and insurance, the decision is so far outof step with the national mainstream of tortlaw that businesses, especially those thatmust allocate capital investment to facilitieslocated both within and outside of Texas,may decide that the potential costs of invest-ing in improvements to real property inTexas are too great. The Court has grantedreview and is currently in the process ofreceiving briefing on the merits from theparties.

Assignment of Stowers ClaimsIn Roy Seger, et al. v. Yorkshire Insurance Co.,Ltd. and Ocean Marine Insurance Co., Ltd.,TCJL has filed an amicus brief requesting theTexas Supreme Court to rehear and grantSeger’s Petition for Review. The case involvesan insured’s assignment of its Stowers claimfor an excess judgment to the plaintiff in theunderlying action. TCJL is interested in thecase because the Amarillo Court of Appealsapplies the landmark Texas Supreme Courtdecision in State Farm Fire & Cas. Co. v.Gandy, 925 S.W.2d 696 (Tex. 1996) in a waythat, under some circumstances, maydeprive a business that assigns a possibleStowers claim of a fair and fully adversarialtrial on the underlying claim. The Courtrecently reinstated the Petition for Review.

Government Standards DefenseAs part of the comprehensive medical liabil-ity and tort reform package enacted in 2003,

the Legislature established a rebuttable pre-sumption that compliance with federalmandatory safety standards protects adefendant from liability for a claim alleging arisk governed by those standards. In 2011The Dallas Court of Appeals carved out a“performance standard” exception to thegovernment standards defense, despite theunambiguous language of the statute. TCJLfiled an amicus brief in the Texas SupremeCourt urging the court to reverse this deci-sion, which in our view largely nullified thedefense. In Kia Motors Corporation and KiaMotors America, Inc. v. Ruiz, the TexasSupreme Court decided that while the 2003government standards defense statute doesnot carve out a “performance standardexception,” the defense does not apply tomandatory safety standards that do not bytheir express terms contemplate the risk thatactually occurred in the case.

Post-employment BenefitsIn 2012 the Fourteenth Court of Appeals inHouston held that a major multinationalcorporate entity may not contract with asenior management employee to conditionpayment of post-employment, non-ERISAbenefits on the employee’s free decision toaccept similar employment with a directcompetitor that may adversely affect theemployer funding those benefits. Clearly, theinability of an entity to enforce an employ-ment contract would be detrimental to thestate’s business climate. TCJL’s amicus briefurges the Texas Supreme Court to reversethis decision. The Court recently ruled thatexecutive bonus-compensation incentiveprograms established under New York laware enforceable in Texas.

Personal Jurisdiction over Non-Resident DefendantsTCJL provided amicus support for a Texascompany in a crucially important caseinvolving the exercise of personal jurisdic-tion by a Texas court over a non-residentdefendant that appropriated the company’strade secrets and proprietary information toestablish a competing business in Texas,resulting in substantial financial loss to thecompany. In 2013 Texas Supreme Courtdetermined in Moncrief Oil InternationalInc. v. OAO Gazprom that Texas courts couldexercise jurisdiction over the non-resident

TCJL Amicus Report

continued on page 12



As the number of states with paid orincurred laws grows, so, apparently, isthe frequency of so-called “letters of

protection.” What are letters of protectionand what impact might they have on per-sonal injury litigation?

In 2003 Texas became one of the first statesin the nation to enact a statutory limitationon the amount of medical or health careexpenses that a claimant may recover in apersonal injury lawsuit. Under the statute(§41.0105, Civil Practice & Remedies Code), aclaimant is only entitled to recover theamount of medical or health care expensesactually paid or incurred by or on behalf ofthe claimant. In other words, if the defendantcan show that the plaintiff’s medical expenseshave been discounted by, for example,Medicare, Medicaid, or private insurancecontract rates, the claimant cannot recoverthe total amount billed, but only the“incurred” amount.

The limitation provides a more realisticmeasure of the claimant’s real out-of-pocketcosts than the old law standard of “reasonableand customary charges” for medical care.Indeed, as the Texas Supreme Court recog-nized in Haywood v. Escabedo, 357 S.W.3d 390(Tex. 2011)(a case in which TCJL participatedas amicus), health care providers may bill a“list” or “full” rate that is substantially higherthan the reimbursement rate for patients cov-ered by government or private insurancepolicies. This difference is precisely why thepaid or incurred statute is so important toascertaining the true value of a claim.

Presumably in an attempt to raise the set-tlement value of claims for medical expenses,some plaintiff’s lawyers use “letters of protec-tion” (LOP) that purport to guarantee pay-ment to health care providers from theproceeds of a future settlement or judgment.LOPs may also be used in cases where aclaimant has no insurance and no reimburse-ment limits or contract rates apply. Often theproviders have not solicited these letters orhad any contact with the plaintiff’s attorney,and a few Texas appellate court opinions havefound that unsolicited LOPs do not constituteenforceable contracts. The Fourteenth Courtof Appeals in Houston has twice consideredwhether a health care provider could enforcean LOP against the plaintiff’s lawyer who sentthe unsolicited letter. In Advantage PhysicalTherapy, Inc. v. Cruse, 165 S.W.3d 21(Tex.App.—Houston [14th District] 2005), forexample, the Court held that in the absenceof the provider’s affirmative acceptance of theLOP, the letter is not an enforceable contract,even if the provider subsequently called theattorney’s office seeking information aboutthe case and decided not to sue the claimantfor unpaid bills.

The Fifth Court of Appeals, however,upheld a trial court decision enforcing anLOP in Hays & Martin, LLP v. Ubinas-Brache,M.D. 192 S.W.3d 631 (Tex.App.—Dallas 2006).In this case, the surgeon contacted the plain-tiff’s lawyer seeking an LOP in exchange forthe surgeon’s cooperation in the lawsuit. Theplaintiff’s firm duly sent the LOP, constitutingacceptance of the surgeon’s offer. The Court

further held that even though the surgeonunsuccessfully attempted to obtain reim-bursement from the plaintiff’s employer’sworkers’ compensation carrier prior to learn-ing about the plaintiff’s settlement, thisattempt did not indicate the surgeon’s lack ofassent to the LOP. Thus, the parties had ameeting of the minds that the LOP wouldprotect the surgeon’s medical bills in theevent of a settlement.

It is apparent from these cases that an LOPmay constitute an enforceable contract underspecific conditions: there must be an offerand an acceptance, either by a clear and con-temporaneous communication to accept anunsolicited LOP or by an express solicitationfollowed by the LOP.

LOPs have become an ethical issue in atleast one state. The West Virginia Board ofMedicine issued an opinion that a physicianwho solicits an LOP before agreeing to treatan established patient who has health insur-ance previously accepted by the physicianmay violate the physician’s duty to place thepatient’s health care needs above the physi-cian’s financial interest. An “establishedpatient” may include a patient whom thephysician treated in an emergency and towhom the physician owes a duty of continu-ing care. The Board went further to say that aphysician who dismisses an establishedpatient with pre-existing insurance coveragefor failing to execute an LOP. The Board thuscounsels physicians to be wary of LOPs, par-ticularly when they have an established rela-tionship with the patient in question. �

Letters of Protection: An Emerging Litigation Issue in Texas?

In response to the Texas Supreme Court’s2011 decision in Texas Rice Land Partnersv. Denbury Green Pipeline-Texas, LLC, the

Texas Railroad Commission last monthissued a proposed rule for comment creatinga new permitting process for pipelines seek-ing common carrier status for the purpose ofexercising eminent domain powers.

In Denbury the Supreme Court held in favorof the landowner that the regulatory processby which the Texas Railroad Commission certi-fies common pipeline carriers does not pre-clude a later constitutional challenge to acommon carrier’s exercise of eminent domainauthority pursuant to Chapter 111, NaturalResources Code. Chapter 111 has long servedas the mechanism by which the state author-ized oil and gas pipelines to acquire right-of-

way for Texas’ energy transportation infra-structure. By recognizing a constitutionalcause of action to invalidate Chapter 111grants of eminent domain authority, theCourt’s decision could subject existing andproposed pipelines to costly, piecemeal litiga-tion and turn state courts into regulatory bod-ies. The long-term effects on Texas’ energyinfrastructure and economy, driven in largepart by massive investments in drilling andtransportation in shale formations across thestate, could be extremely detrimental to fur-ther capital investment and job creation in thestate. Proposed legislation establishing a for-mal permitting process at the RRC did not passin 2013.

Under the proposed rule a pipeline opera-tor seeking classification (or renewing an

existing classification) as a common carriermust file an application with the RRC statingthe factual basis of the proposed classifica-tion and the pipeline’s purpose. The operatormust also provide supporting documenta-tion and any other information requested bythe RRC. Once the application is consideredadministratively complete and sufficient,within 45 days the RRC shall issue or denythe permit, or renew, amend, or cancel anexisting permit. The RRC may also revoke apreviously issued permit after notice andhearing, if it finds that the pipeline is notbeing operated in accordance with state law.The proposed rule does not contain a priornotice and hearing requirement, one of thesticking points in the negotiations betweenlandowners and operators last session. �

Texas Railroad Commission Proposes Common Carrier Pipeline Permitting Rule



The U.S. Supreme Court’s decision inCitizens United v. FEC is wreakinghavoc with campaign finance laws

across the country, and Texas is no excep-tion. Citizens United overturned 50 years ofcampaign finance law that outlawed directcorporate expenditures (so-called “indepen-dent expenditures”) to advocate the electionor defeat of specific candidates. Since theCourt handed down the decision in 2010,numerous facial challenges to direct cam-paign expenditure bans and limitations havespread like wildfire. Just last year the FifthCircuit followed Citizens United and struckdown part of Texas’ longstanding prohibitionof corporate contributions to general pur-pose political committees (GPACs). InTexans for Free Enterprise v. Texas EthicsCommission, 732 F.3d 535 (5th Cir. 2013), theFifth Circuit cleared the way for corporationsto make contributions from corporate fundsto GPACs that exclusively make independentexpenditure and do not make contributionsto individual candidates.

On August 12, the Fifth Circuit issued adecision chipping away further at the Texascampaign finance system. In CatholicLeadership Coalition of Texas v. Reisman,2014 U.S.App. LEXIS 15558, the Court struckdown current law requiring a GPAC to wait60 days before exceeding $500 in contribu-tions and expenditures and to collect contri-butions from at least 10 persons. The Courtupheld the requirement that the PAC file acampaign treasurer appointment prior tomaking contributions or expenditures. Italso, at least for the time being, upheld theban on corporate contributions to GPACsthat make both independent expendituresand candidate contributions.

The Court reasoned that the 60-day, $500limit and the 10-contributor requirementunconstitutionally place a ceiling on speechfor sixty days, even if the PAC is willing tocomply with the applicable disclosure anddisclaimer requirements. It likewise ruledthat the $500 limit on contributions onexpenditures during that period could notbe justified by the State’s interest in prevent-ing quid pro quo corruption, since CitizensUnited ruled as a matter of law that inde-pendent expenditures cannot give rise to

corruption of the appearance of corruption.Moreover, the Court opined that Texas couldstrengthen its current disclosure require-ments and achieve the same result withoutoverburdening First Amendment politicalspeech. On the bright side for the State, theCourt ruled that a non-profit corporationcould not donate an e-mail list to a GPACthat makes both independent expendituresand candidate contributions, despite thePAC’s representation that it would use thelist solely for independent expenditures.Nevertheless, the Court remarked that thepractice of “hybrid” PACs that make bothtypes of expenditures “appears destined tobe a coming campaign-finance law battle-ground.”

Taken together, the two Fifth Circuit decisions invalidate four key provisions ofthe Texas Election Code (along with EthicsCommission opinions construing these sections):

• §253.037(a)(1), which prohibits a GPACfrom knowingly authorizing a politicalcontribution or political expenditureunless it has filed a campaign treasurerappointment at least 60 days prior to thedate the contribution of expenditure ismade (it must still file a campaign treas-urer appointment);

• §253.031(b), which prohibits a GPAC fromknowingly accepting political contribu-tions totaling more than $500 or make orauthorize political expenditures totalingmore than $500 at a time when a cam-paign treasurer appointment is in effect;

• §253.037(a)(2), which bars a GPAC fromknowingly authorizing a political contri-bution or political expenditure before ithas received contributions from at least10 persons; and

• §253.094(a), insofar as it prohibits a cor-poration or labor organization from mak-ing a political contribution to anindependent-expenditure-only GPAC.

Inevitably, Citizens Unitedwill continue tospawn further challenges to Texas campaignfinance laws. The most likely target forfuture litigation is the Judicial CampaignFairness Act, which limits contributions andexpenditures in judicial campaigns. In gen-

eral, the Judicial Campaign Fairness Actestablishes an overall expenditure limit for aSupreme Court candidate of $2 million perelection (with lesser amounts for intermedi-ate appellate and trial courts). This limita-tion applies to political expenditures madeor authorized by the judicial candidate, butnot to independent expenditures. See§253.168, Election Code. A general-purposePAC may make independent expenditureson behalf of a judicial candidate, if the PACtreasurer files an affidavit with the TexasEthics Commission stating that “the com-mittee has not directly or indirectly commu-nicated with the candidate’s campaignregarding a “strategic matter, includingpolling data, advertising, or voter demo-graphics, in connection with the candidate’scampaign.” See §253.160(c), Election Code.

There is another statutory provision,however, that requires a general-purposepolitical committee to give notice at least 60days prior to the election of its intention tomake a direct campaign expenditures in ajudicial race that in the aggregate exceed$25,000. See §253.163(b), Election Code.Violation of this provision carries a civilpenalty of up to three times the amount ofpolitical expenditures incurred. §253.163(g),Election Code. Though couched as a simplenotice requirement, the statute effectivelybars a PAC from deciding to make independ-ent expenditures after the 60-day deadlinehas passed.

While the U.S. Supeme Court’s ruling inCitizens United seems to leave Buckley v.Valeo intact with respect to pre-election dis-closure and registration requirements, a pre-election notice of future intent to makeindependent expenditures that operates tobar such expenditures on a date certain maynot pass constitutional muster. Given theFifth Circuit’s analysis of the 60-day waitingperiod prescribed by §253.037(a)(1), it highlyis likely that the Court would apply strictscrutiny to §253.163(b) provision as well,since it clearly places a significant burden—indeed a prohibition—on a PAC’s politicalspeech in advance of an election. The Statewould then have to show a compelling inter-

U.S. Fifth Circuit Strikes Down GPAC 60-day, $500 Expenditure Limit




On September 15 the Texas SupremeCourt heard oral arguments in In reDeepwater Horizon (No. 13-0670). The

case, which arose out of the explosion andsubsequent oil spill involving the BPDeepwater Horizon offshore oil well in theGulf of Mexico, is before the Court on certi-fied question from the U.S. Fifth CircuitCourt of Appeals. At issue is the constructionof Texas law with respect to the scope of BP’sinsurance coverage under an additionalinsured provision in BP’s contract withTransocean Holdings, Inc., which owned thewell. Transocean contracted with both pri-mary liability and excess liability insurers tocover its insurance requirements under theBP contract. The combined coverage underthese policies approached $750 million.

When the well exploded, BP notified thecarriers of its losses, including pollution-related losses. The carriers filed a declaratoryjudgment action against BP seeking a decla-ration that the insurers have no additionalinsured obligation with respect to the pollu-tion-related losses. Applying Texas and FifthCircuit case law, the federal district courtruled for the insurers on the basis that BP’sdrilling contract with Transocean madeTransocean liable only for spills occurring onor above the surface of the water, thusexcluding damage from an underwater spill.The Fifth Circuit initially reversed, but sub-sequently withdrew its opinion and certifiedthe following questions to the TexasSupreme Court:• Whether Transocean’s umbrella insurance

policy, to which BP was an additionalinsured, or the indemnity clauses in thedrilling contract determine govern thescope of BP’s losses;

• Whether Texas law recognizes the“sophisticated insured exception” to thegeneral rule that an ambiguous insurancepolicy should be construed in favor of theinsured, even if the insurer’s interpreta-tion is more “reasonable.”

At the heart of the case is the applicability ofthe Texas Supreme Court’s decision inEvanston Ins. Co. v. ATOFINA Petrochems,Inc., 256 S.W.3d 660 (Tex. 2008). In this case,ATOFINA contracted with a service companyto perform maintenance on its oil refinery.The contract required the contractor toname ATOFINA as an additional insuredunder its umbrella liability policy. WhenATOFINA and the service company were

sued for wrongful death following an acci-dent at the refinery, the insurer (Evanston)refused to defend ATOFINA, claiming thatthe additional insured provision did notextend coverage because ATOFINA hadexcluded coverage for its sole negligencefrom the contract’s indemnity clause. TheCourt found that the additional insured pro-vision operated as a separate and independ-ent agreement from the indemnity clause;ATOFINA became a direct insured by virtuethe additional insured provision at the sametime it agreed contractually with the servicecompany not to seek indemnification for itsown sole negligence.

BP argues that ATOFINA applies in thesame way to its additional insured statusunder its contract with Transocean.Transocean and the insurers, on the otherhand, argue that ATOFINA does not applybecause, under the specific circumstances ofthis case, the additional insured provision isnot separate and independent from theindemnity clause in the drilling contract.The concomitant issue of how the Courtshould construe the additional insured pro-vision involves the general rule that thecourt will interpret an insurance contract infavor of the insured, if the insured’s interpre-

tation is “reasonable.” Nat’l Union Fire Ins.Co. of Pittsburgh, Pa. v. Hudson Energy Co.,811 S.W.2d 552 (Tex. 1991). The carriers wantthe Court to recognize a “sophisticatedinsured exception” in this case because BP(and Transocean) are large multinationalentities with significant bargaining powerand sophistication in contracting. BP coun-ters that the insurers drafted the umbrellapolicy and are now seeking to escape theconsequences of their own contract.

The case has received attention fromamici on both sides. The NationalAssociation of Manufacturers urges theCourt to observe the “four corners” rule ofcontract construction and find that theumbrella policy covers BP’s losses. The briefalso asks the Court not to recognize a“sophisticated insured” exception. On theother side, briefs filed on behalf of theInternational Association of DrillingContractors, Aviation Insurance Association,Lloyd’s Market Association, InternationalUnderwriting Association, Property CasualtyInsurers Association of America, andAmerican Institute of Marine Underwriters,and other insurance organizations take theopposite position. �

SCOT Hears Arguments in Deepwater Horizon Case

defendant under the facts of the case andremanded the case to the trial court for fur-ther proceedings. The Court deniedGazprom’s motion for rehearing.

Negligent Hiring/Punitive DamagesIn an alarming court of appeals decision, theDallas Court of Appeals issued a decisionthat erodes the distinction between negli-gence and gross negligence, violating thisthe Texas Supreme Court’s landmark deci-sion in Transportation Insurance Company v.Moriel, 879 S.W.2d 10 (Tex. 1994) and subse-quent decisions. If affirmed, the court ofappeals’ decision will subject Texas employ-ers of all types and sizes to punitive damagesfor mere negligent hiring and have a signifi-cant chilling effect on employment opportu-nities for Texans. TCJL provided amicussupport for the Petitioner in this case. In U-Haul International Inc. v. Waldrip, theCourt ultimately reversed a $30 million

punitive damages award against U-Haul.

Contractual Torts/Punitive DamagesThe San Antonio Court of Appeals allowed aplaintiff to recover punitive damages in abreach of contract claim, potentially con-verting every contract dispute into a tortclaim with liability for punitive damages.TCJL filed an amicus brief on behalf of thedefendant Host Marriott urging the TexasSupreme Court to accept review. The Courtinitially declined to hear the case, HMCHotel Properties II Limited Partnership andHost Hotels & Resorts, L.P., f/k/a HostMarriott, L.P. v. Keystone-Texas PropertyHolding. TCJL filed a second amicus sup-porting HMC’s motion for rehearing, whichthe Court granted. In June, the Court issueda decision reversing the San Antonio Courtof Appeals and rendering judgment for HostMarriott. Keystone-Texas’ motion for rehear-ing is currently pending. �

TCJL Amicus Reportcontinued from page 9



Unlike its federal counterpart, in recenttimes the Texas Supreme Court hasnot seen very many split decisions.

The Court’s long-awaited ruling in ZachryConstruction Corporation v. Port of HoustonAuthority of Harris County, Texas (No. 12-0772) is a notable exception.

The case arose out of a construction con-tract between Zachry and the Port to build awharf on the Bayport Ship Channel at anapproximate cost of $62.5 million. Under thecontract, Zachry, as independent contractor,assumed sole authority to determine themethod and manner of the work. After theinitial construction work had begun, the Portand Zachry agreed to a change order addinga new section to the wharf at an additionalcost of nearly $13 million. Shortly afteragreeing to the change order, the Portordered Zachry to revise and resubmit itsplans for the new construction, to whichZachry objected as contrary to its responsi-bility as an independent contractor. In theevent, although Zachry completed the firstphase of construction within the contractdeadlines (allowing a Chinese ship to docksuccessfully), the Port’s contravention of thechange order caused a two-and-one-half-year delay in completion of the project. ThePort withheld $2.36 million in liquidateddamages as a result of the delay. Prior tocompletion of the project, Zachry sued thePort, claiming $30 million in damages fromdelays caused by the Port. The Port arguedthat the contract’s “no damages for delaycause” precluded Zachry’s claim, even if thePort’s misconduct caused the delay. Zachrylikewise sought to recover the $2.36 millionin withheld liquidated damages. The Portargued that Zachry’s claims were precludedby the releases it executed in order to obtainthe periodic payments from which the liqui-dated damages were withheld.

The trial court ruled that the contract’s nodamages for delay provision could not beenforced if the Port’s intentional misconductcaused the delay in the first place. It alsofound that the release did not unambigu-ously cover Zachry’s claim for the liquidateddamages withheld. The case thus proceededto the jury, which found that the Port

breached its contract with Zachry when itinterfered with Zachry’s performance of thechange order. It also found that the Port’sinterference was active, arbitrary, and in badfaith. Likewise, the jury found that Zachrydid not release its claim to recover the with-held liquidated damages. It awarded $18.6million in damages for the breach, as well asthe unreleased $2.36 million (with a$970,000 offset for other defective work). Thetrial court ordered judgment for Zachry onthe verdict. Both parties appealed. The 14thCourt of Appeals in Houston reversed thejudgment, finding that the no damages fordelay provision barred Zachry’s recover ofdelay damages, that Zachry released itsclaim for the withheld liquidated damages,and that the Port was entitled to $970,000 fordefective work. The Court of Appeals alsoawarded nearly $10.7 million in attorney’sfees to the Port. Zachry sought and the TexasSupreme Court granted review.

In an opinion by Chief Justice Hecht,joined by Justices Green, Guzman, Devine,and Brown, the Supreme Court accepted thejury’s determination that the Port’s inten-tional misconduct caused the delay in thefirst place, thus invalidating the “no damagesfor delay” clause in the contract. The Courtcited the substantial majority of jurisdictionsadhering to the common law rule that suchclauses do not shield an owner from liabilityfor deliberate or wrongful interference withthe contractor’s work. The Court then deter-mined that the Local Government ContractClaims Act (Tex. Loc. Gov’t Code §§271.151-.160) does not shield a local governmentalentity from liability for such interference.

The central issue in the case (and thepoint of disagreement between the majorityand the dissent) involves whether a localgovernmental entity that enters into a con-struction contract waives its sovereignimmunity from suit for any recovery forwhich the contract does not expressly pro-vide. The Supreme Court found fault withthe 14th Court of Appeals for failing to reachthis question (the CA stopped with theenforcement of the no damages for delayclause), since whether a governmental entitycan lawfully invoke sovereign immunity is a

jurisdictional question that precedes thebreach of contract issue.

To address the question, Chief JusticeHecht closely analyzed the two operativestatutory provisions: (1) §271.152, providingthat a local governmental entity that entersinto a contract for goods or services “waivessovereign immunity for suit for the purposesof adjudicating a claim for breach of the con-tract, subject to statutory terms and condi-tions; and (2) §271.153, which limits recoveryon a breach of contract claim for which theentity has waived immunity once the entity’sliability has been established. Generally,§271.153 limits the amount that a contractormay recover against a local governmentalentity to: (1) the balance due and owed bythe entity under the contract, including dam-ages as compensation for increased costdirectly caused by owner-caused delays oracceleration; (2) the amount owed for changeorders; (3) reasonable and necessary attor-ney’s fees; and (4) interest.

Justice Hecht first determined that theLocal Government Contract Claims Act doesnot waive immunity from suit on a claim fordamages not recoverable under §271.153. Inother words, the statute only waives immu-nity for the four enumerated categories ofdamages specifically set out in the statute. Inso ruling, the Court disapproved of ten courtof appeals decisions from across the state tothe extent they are contrary to Zachry. Thesecond part of the majority opinion, JusticeHecht held that the contractor may recover“the balance due and owed by the entityunder the contract,” even if the contractdoes not expressly provide for payment.“The word ‘due’ simply means ‘owing andpayable’ and ‘owing means ‘unpaid’,” wroteJustice Hecht. “A ‘balance due and owed . . .under the contract’ is simply the amount ofdamages for breach of contract payable andunpaid. Direct damages for breach—‘thenecessary and usual result of the defendant’swrongful act’—certainly qualify” (19). Themajority also found that the amount of the“balance due and owed” does not have to beascertainable from the contract because the

Divided Texas Supreme Court Finds Waiver of Sovereign Immunity in Construction Contract; No-Damages-for-Delay Provision Unenforceable




The Board of Regents of the Texas TechUniversity System named SenatorRobert L. Duncan (R-Lubbock) as the

fourth chancellor of the Texas TechUniversity System on July 7, 2014. Followinghis appointment, Senator Duncan retiredfrom the Texas Senate, where he served withgreat distinction for 18 years. Prior to hiselection to the Senate, Senator Duncanserved two terms in the Texas House ofRepresentatives.

During his long tenure in the Legislature,Senator Duncan provided exceptional andprincipled leadership to the people of hisdistrict and to the state as a whole. Becauseof his tireless work ethic, integrity and hon-esty, and the high esteem in which his col-leagues held him, virtually no majorlegislation has been enacted in the morethan two decades that has not benefitedfrom Senator Duncan’s intelligence, judg-ment, and good sense. As a member of thelegislative staff of Senator John Montford (D-Lubbock), Senator Duncan provided invalu-able counsel and advice in the passage of the1989 Texas Workers’ Compensation ReformAct. As a member of the House, SenatorDuncan authored the 1995 venue reform billand played a central role in negotiating theentire package of civil justice reforms thatsession. As Chair of the Senate State AffairsCommittee for many years, Senator Duncanleft his mark on dozens of pieces of majorlegislation, including the 2003 medical liabil-ity and tort reform act and the 2005 asbestoslitigation reforms. Senator Duncan hasalways been the leading champion of judi-cial selection reform, twice passing constitu-tional amendments through the Senatecalling for an election-retention system. As afriend to the cause of a fair and balancedjudicial system, Senator Duncan has noequal, and we will sorely miss his wisdomand leadership in the Texas Senate.

But the Legislature’s loss — and ours — is Texas higher education’s gain. SenatorDuncan’s official biography says it all:

“As chancellor, Duncan is the chief execu-

tive officer of the Texas Tech UniversitySystem, which includes four componentinstitutions — Texas Tech University, Texas Tech University Health SciencesCenter, Angelo State University and TexasTech University Health Sciences Center at ElPaso. He is focused on providing each uni-versity with the resources needed to ensurethe academic achievement of all studentsenrolled in the system institutions. As part ofhis leadership, the chancellor also works inboth Austin and Washington, D.C. toincrease funding for all system institutions.

Before becoming chancellor, Duncanserved in the Texas Legislature for more thantwo decades. He was elected to District 84 inthe Texas House of Representatives in 1992.In 1996, he won a special election tothe Texas Senate, where he served untilresigning to become chancellor.

While representing District 28 as StateSenator, Duncan crafted major legislationimpacting Texans and served on three of theSenate’s most powerful committees—Finance, State Affairs and BudgetConference. He served as president pro tem-pore of the Texas Senate during the 81stLegislative Session and served as a memberof the Senate Committee on HigherEducation, the Education Committee andthe Natural Resources Committee. He waswidely recognized as a leader in the TexasLegislature. Texas Monthly magazine namedDuncan to its ‘Ten Best List’ more times thanany other member of the legislature.

Duncan also was a law partner at

Crenshaw, Dupree and Milam in Lubbock for more than 25 years. He advised clients in insurance law and commercial litigation,among many others areas of his legal practice, and remains ‘of counsel’ for the law firm.

Duncan is a lifelong West Texan. He wasraised in Vernon, Texas. He is the only son offive children born to Frank L. Duncan andRobena Formby Duncan. Duncan and hisfamily have a rich heritage with Texas TechUniversity. His uncle, Marshall Formby, andcousin, Clint Formby, both served on theTexas Tech Board of Regents.

Duncan received his bachelor’s degree inagricultural economics from Texas TechUniversity in 1976. While completing hisundergraduate degree, he served as thestudent body president. Duncan received his doctorate of jurisprudence fromthe Texas Tech University School of Law in 1981.

Duncan has two children. His daughter,Lindsey Pike, is a public school teacher andcounselor, and is married to Wes Pike. Hisson, Matthew Duncan, is a food distributionsales representative. Chancellor Duncan ismarried to Terri Duncan. Mrs. Duncan alsohas two children, Justin Patterson, an IT spe-cialist, and Clayton Patterson, an auto-financing assistant. All the children are TexasTech University graduates.”

All of Senator Duncan’s friends here atTCJL wish him God’s speed in the importantwork he has before him. Texas Tech couldnot have put its future in better hands. �

Senator Duncan Named Chancellor of the Texas Tech University System

Serving in the Texas Legislature for more than two decades was a tremendous honor. With the help of many leaders and organizations like the Texas Civil Justice League, we were able to accomplish great things that bettered our state. In my new role as Chancellor of the Texas Tech

University System, I look forward to continued collaboration in Austin that will help advance our four universities and improve higher education in Texas.

Chancellor Robert Duncan, Texas Tech University System



statute already allows recovery of compen-sation for owner-caused delays, which can-not be quantified in advance.

Justice Boyd’s dissent, joined by JusticesJohnson, Willett, and Lehrmann, vehementlydisagreed with the majority that contractdamages must first be expressly provided foror contemplated in the contract before theycan be considered “due and owed.” Themajority responded that nothing in §271.153imposes such a limitation; in fact, the statutespecifically excludes the recovery of conse-quential damages, even if they are specifi-cally provided for in the statute.

In the third part of the opinion, JusticeHecht considered whether the no-damages-for-delay provision of the contract barredZachry’s claim. The Court of Appeals held

that it did, despite common law exceptionsto the enforcement of such provisions in theevent of active interference or fraud on thepart of the entity (which, as the Court pointsout, the jury found in this case). The Court,however, concurred with the substantialmajority of jurisdictions that, on public pol-icy grounds, decline to enforce no-damages-for-delay provisions if the governmentalentity deliberately and wrongfully interfereswith the contractor’s performance.“Generally, a contractual provision ‘exempt-ing a party from tort liability for harmcaused intentionally or recklessly is unen-forceable on grounds of public policy,”wrote Justice Hecht. “We think the samemay be said of contractual liability. To con-clude otherwise would incentivize wrongful

conduct and damage contractual relations”(26). The Court further noted that freedomof contract does not extend to authorizingconduct that violates law or public policy.

Finally, the Court considered whetherZachry had released its claims for liquidateddamages withheld by the Port. Justice Hechtruled that a release of claims for work com-pleted, as a matter of law, does not releaseclaims for withheld liquidated damages forwork not completed. The Court reversed theCourt of Appeals’ judgment awarding attor-ney’s fees to the Port, but upheld the jury’sfinding that Zachry breached its contractwith respect to defective wharf fenders. TheCourt remanded the case to the trial courtfor further consideration in accordance withits opinion. �

est to limit such speech, and that the 60-daynotice provision is narrowly tailored toachieve that result. Presumably, the Statewould assert a compelling interest in pre-venting corruption or the appearance of cor-ruption as the result of unrestrained, “lastminute” PAC expenditures in the 60 daysprior to an election.

The problem with the anti-corruptionargument is three-fold:

1. The provision on its face allows some PACsto make direct campaign expenditures in ajudicial race, while barring others fromdoing so. The only difference betweenthem is the date on which they form an“intent” to make independent expendi-tures. As previously noted, the Court statedin Citizens United that the “FirstAmendment bars attempts to disfavor cer-tain subjects or viewpoints, as well asrestrictions distinguishing among differentspeakers, allowing speech by some but notby others.” The 60-day notice provision

arguably has this result.

2. Citizens Unitedmakes it clear thatBuckley’s anti-corruption rationale onlyapplies to political contributions, not toindependent expenditures. Whether anindependent expenditure made 61 daysor 59 days before an election does notchange the fact that the “absence of coor-dination” inherent to independent expen-ditures vitiates the appearance ofcorruption associated with direct contri-butions in exactly the same way.

3. The State might argue that the 60-daynotice requirement is necessary to pre-vent a PAC from organizing and makingexpenditures near the date of the electionwithout disclosing them in a timely fash-ion, thus effectively concealing suchexpenditures from public view until theelection is over. This argument is in effectanother version of the anti-corruptionrationale and would likely fail since the notice requirement effectively bars

certain independent expenditures. In view of the growing number of ElectionCode provisions either already invalidated orin imminent danger of invalidation pursuantto Citizens United, it may be time for theLegislature to revise Chapter 253 to elimi-nate unconstitutional (or soon likely to beunconstitutional) provisions and strengthendisclosure and disclaimer requirements.Citizens United and subsequent casesdemonstrate that federal courts will apply alower level of scrutiny to campaign financethat promote transparency as opposed toplacing monetary limits on political speech.Perhaps it is time for the Legislature to con-sider updating disclosure statutes to takeadvantage of technological advances thatallow contemporaneous reporting, espe-cially in the period right before an election.On the other hand, any Texas statutes thatpurport to limit expenditures, as they do injudicial races, do not make much sense in anera of unlimited corporate independentexpenditures. �

U.S. Fifth Circuit Strikes Down GPAC 60-day, $500 Expenditure Limitcontinued from page 11

Divided Texas Supreme Court Finds Waiver of Sovereign Immunity in Construction Contract; No-Damages-for-Delay Provision Unenforceablecontinued from page 13


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I N S I D E Greg Abbott: A Blueprint for Growth T

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