In this edition of Litigation Roundup, Dallas residents were granted a temporary injunction that will prohibit the city from enforcing new ordinances that would severely restrict the availability of short-term rental homes, Texas Attorney General Ken Paxton accuses the U.S. State Department of conspiring to censor conservative-leaning media outlets, and the Texas Supreme Court agrees to hear a case involving the scope of the Public Utility Commission of Texas’ authority.
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Dallas County District Court
Judge Halts Short-term Rental Ban
Dallas County District Judge Monica Purdy recently halted the city of Dallas from enforcing new ordinances that opponents argued would ban about 95% of all short-term rentals within the city limits.
In a temporary injunction order issued Dec. 6, Judge Purdy wrote that she was unpersuaded by a study the city said it relied on in passing the restrictions.
“Plaintiffs presented evidence that the June 2021 study is not conclusive and overestimates the associated concerns with STRs that the city claims are the basis for its governmental interests,” she wrote. “Plaintiffs thus presented evidence that the STR ordinances do not rationally relate to the claimed governmental interests based on any available data. Plaintiffs also presented evidence that te city’s claimed interests about housing, ‘neighborhood character’ and the like are unquantified and unquantifiable, and that the city does not know how much improvement the ordinances will actually achieve in those areas — if any.”
The lawsuit, brought by the Dallas Short-Term Rental Alliance in October, has been tentatively set for trial in June.
The Alliance is represented by Michael Hurst, David Coale and Michele Naudin of Lynn Pinker Hurst & Schwegmann.
Dallas is represented by Andrew Spaniol, Stacy Rodriguez and Ryan Crocker of the city attorney’s office.
The case number is DC-23-16845.
Northern District of Texas
Fort Worth Roofing Co. Pays $9M, Settles PPP Fraud Claims
Empire Roofing, a commercial roofing contractor based in Fort Worth, has entered an agreement to pay the federal government $9 million in exchange for bringing an end to allegations the company violated the False Claims Act when eight of its affiliated companies applied for Paycheck Protection Program loans and represented they were eligible to receive the funds.
U.S. District Judge Jane J. Boyle signed off on the deal Dec. 7, ending the lawsuit that was filed in September 2022. The government alleged Empire misrepresented that it employed fewer than 500 people in order to qualify for the loans.
The qui tam lawsuit was brought by whistleblower Sidesolve, a company that focuses on investigating corporate fraud, primarily in the healthcare industry. Sidesolve will receive $1 million of the settlement.
“PPP loans were intended to help small businesses during the Covid-19 pandemic,” said U.S. Attorney Leigha Simonton. “Our office invests significant time and resources to hold accountable those who obtained PPP funds for which they were not eligible and will continue to do so going forward.”
The federal government is represented by William C. Admussen and Andrew S. Robbins of the Department of Justice in Dallas.
Sidesolve is represented by Jason Marcus of Bracker & Marcus in Atlanta.
The case number is 3:22-cv-02060.
Dallas Importer, Chinese Companies to Pay $2.5 Million to Resolve FCA Claims
ADCO Industries, also known as Dallco Marketing, and two Chinese companies have agreed to pay the federal government $2.5 million to resolve allegations they conspired to underreport imported goods and underpay customs duties on imports from China.
Whistleblower plaintiffs Donald Reznicek and Colleen McFarland brought the qui tam lawsuit on behalf of the federal government in February 2022 against ADCO, its owner Raymond E. Davis, customs broker Calvin Chang, Xiamen Atlantis MFC Co. and Xiamen Taft Medical Co., but court documents in the case were not unsealed until last month.
The lawsuit alleged that the companies had created fake invoices to submit to U.S. Customs and Border Protection that underreported the value of the goods ADCO received from China, while a second set of correct invoices were used between the companies to ensure ADCO paid Chinese suppliers the true value of the goods. The goods included dollies, shelves and safety cutters, according to the complaint.
“Customs laws are an important component of national security and, among other things, protect the public and American businesses from unfair competition,” said U.S. Attorney Leigha Simonton. “This office will continue to aggressively investigate and hold accountable anyone it believes has tried to cheat the government and the public at large through the manipulation of customs duties.”
Reznicek and McFarland will receive $500,000 of the settlement.
The case was before U.S. District Judge Sam A. Lindsay.
Reznicek and McFarland are represented by Cary L. McDougal and Andrew Michael Miller of Baron & Budd. The case was prosecuted by Brian Stoltz and Braden Civins of the Department of Justice in Dallas.
Counsel information for the defendants was not available Monday.
The case number is 3:22-cv-00332.
Eastern District of Texas
U.S. State Dept. Accused by Texas AG of Media Censorship Conspiracy
Texas Attorney General Ken Paxton has joined conservative news outlets The Daily Wire and The Federalist in suing the U.S. Department of State and government leaders for allegedly engaging in a conspiracy to censor certain media outlets.
The lawsuit was filed Dec. 6 and alleges that the state department, via its Global Engagement Center, worked to limit the reach of certain news outlets by funding censorship technologies. Texas alleges that while congress created to GEC to counter foreign propaganda, it has instead been used as a tool to censor and violate the First Amendment rights of certain conservative-leaning domestic entities.
The plaintiffs allege the federal agency is carrying out “one of the most egregious government operations to censor the American press in the history of the nation.”
“This agency will not get away with their illegal campaign to silence citizens and publications they disagree with,” Paxton said in a news release.
The plaintiffs are represented by Margaret A. Little, Margot J. Cleveland and Casey Norman of the New Civil Liberties Alliance and Susanna Dokupil, Amy S. Hilton and Johnathon Stone of the Texas attorney general’s office.
Counsel information for the federal government was not available Monday.
The case has been assigned to U.S. District Judge Jeremy D. Kernodle.
The case number is 6:23-cv-00609.
Western District of Texas
Tesla Says Insurer Must Defend it in Suit over Worker’s Death
Tesla is suing Travelers Property Casualty Company of America over the insurer’s refusal to cover the costs of a lawsuit brought in the wake of a worker’s heat-related death at the Tesla Gigafactory.
According to the lawsuit, Antelmo Ramirez Sr. died at the factory in Travis County in September 2021 and his family filed suit against Tesla and an additional insured company, Belcan, in May 2022, alleging his death was caused by exposure to excessive heat.
Tesla sent a demand to Travelers in July 2022 for indemnification and defense. But it wasn’t until May 2023 that Travelers rejected the demand.
“In its denial letter, Travelers conceded that Tesla is an additional insured under the policy but refused to provide coverage because, ‘[i]n the lawsuit, Tesla is being sued for its own alleged negligent conduct not the acts or omissions of Belcan,’” Tesla told the court in the lawsuit filed Dec. 1. “Travelers also asserts that ‘it is [Travelers’] understanding that Tesla directed and controlled the construction site. As controller of the worksite, Tesla may be considered the decedent’s employer, which may implicate the Employer’s Liability Exclusion. …’ Travelers does not cite to any allegations in the underlying action — nor could it — to support these assertions.”
Tesla is seeking a declaration that Travelers has wrongfully refused to provide coverage and is bringing claims for breach of contract and violation of the Prompt Payment of Claims statute as well.
Tesla is represented by Sean F. Gallagher and Joshua A. Romero of Jackson Walker.
Counsel for Travelers had not filed an appearance as of Monday.
The docket did not indicate that the case had been assigned to a specific judge as of Monday afternoon.
The case number is 1:23-cv-01466.
First Court of Appeals, Houston
Furniture Co. Gets Second Chance in Asbestos Damage Case
A company that operated a furniture store will get another chance to convince a jury that its landlord was negligent in ripping up flooring that released asbestos fibers and ruined its inventory.
In an opinion issued Dec. 7, a three-justice panel agreed with Pangco Associates that a Brazoria County district judge wrongly prevented it from submitting a question on negligence to the jury in its lawsuit with landlord Haraki Ltd.
According to court documents, Pangco had fallen behind on lease payments and was locked out of the leased space where it operated a furniture store, but it entered into a settlement agreement with Haraki under which it would pay $60,000 and get 10 days access to the space to move out its inventory.
But during that 10-day period, Haraki began demolition on the floors, which released asbestos fibers that covered the couches, beds, and other inventory belonging to Pangco.
At trial and over Pangco’s objection, the judge allowed Pangco to only submit a question to the jury asking whether Haraki had breached the settlement agreement but not whether the alleged destruction of roughly $283,000 in inventory had been negligent.
The appellate court found Pangco had submitted enough evidence to get the negligence question before a jury and rejected an argument from Haraki that the negligence issue was subsumed within the breach-of-contract claim and that submitting questions on both theories would have “confused the jury.”
“The tendered questions on negligence asked the jury to consider whether Haraki failed to use ordinary care and whether such failure proximately caused Pangco’s damages,” the justices wrote. “The jury could have concluded, in the associated damages question, that Pangco was entitled to the value of its lost inventory. Therefore, contrary to Haraki’s assertion, Pangco’s negligence claim was not subsumed within its breach-of-contract claim. And the record does not reflect any finding by the trial court that the two separate theories would confuse the jury.”
The jury found Haraki had not breached the settlement agreement.
Chief Justice Terry Adams and Justices Richard Hightower and Julie Countiss sat on the panel.
Pangco is represented by Robert E. Ray of Houston.
Haraki is represented by David K. Mestemaker of Houston.
The case number is 01-22-00458-CV.
Texas Supreme Court
Justices Grant PUCT Review in APA Challenge
On Friday the state’s high court granted a petition for review that the Public Utility Commission of Texas had filed in July in a lawsuit where the regulator is challenging a ruling from the Third Court of Appeals in Austin that an order it issued — approving changes to certain ERCOT protocols — ran afoul of both the Administrative Procedure Act and the Public Utility Regulatory Act.
Oral arguments in the case pitting the PUCT against RWE Renewables Americas and TX Hereford Wind have been scheduled for March 19. In its petition for review, PUCT argued that the challenged order doesn’t qualify as a “rule” under the APA of the utilities code.
“Under the rulemaking authority delegated to it by the commission and procedures adopted by ERCOT, ERCOT develops and adopts changes to its nodal protocols and other rules,” PUCT told the court. “Commission orders like the one challenged here just approve those changes and allow them to go into effect. Given the close relationship between ERCOT and the Commission and their joint participation in a carefully crafted regulatory scheme, it makes no sense for the Commission to be required to engage in APA rulemaking to approve a protocol revision that has already been developed through ERCOT’s detailed process.”
ERCOT, represented by former Texas Supreme Court Chief Justice Wallace B. Jefferson of Alexander Dubose & Jefferson, filed an amicus brief urging the court to grant review.
“The Austin Court of Appeals’ holding will make it nearly impossible for ERCOT to effectively use the rulemaking power conferred on it by the Legislature and PUC,” the brief argues. “As a consequence, the enforceability of more than 150 revisions to the ERCOT Protocols, which govern Texas’s electricity grid and wholesale electricity market, are now in question, as are the many revisions currently underway.”
The case number is 23-0555.
U.S. Court of Appeals for the Fifth Circuit
No Qualified Immunity for Cop Who ‘Violently Seized’ Senior Citizen Who Died
A police officer in Louisiana cannot use qualified immunity as a defense to claims brought by the family of William E. Walls accusing the officer of violating his civil rights when he forcefully detained him moments before he had a heart attack and died.
Caddo Parish Sheriff’s Deputy Ryan Chapman had appealed after a district court rejected his argument that qualified immunity should bring an end to the excessive force lawsuit. According to court documents, police believed a wanted individual was living on property owned by Walls.
Walls was initially cooperative with deputies who arrived on scene, but at some point Chapman rejected Walls’ offer to help locate the wanted individual and allegedly “cursed at him, threatened him and ordered him back inside his home.”
After that, Walls declined to let deputies enter his home but held his phone and watched from a window as deputies searched a nearby home. Chapman believed Walls was filming the operation with his phone so he forced his way into Walls home, “forcefully grabbed him, “handcuffed him
“aggressively and violently,” then “slammed” him against the patrol car before placing him inside.
While detained, Walls, a senior citizen, suffered a heart attack and stopped breathing. He was pronounced dead at the scene.
“On the well-pleaded facts of this case, Walls was not suspected of any crime, posed no immediate threat to the safety of the deputies or others, and made no attempt to actively resist arrest or evade arrest by flight,” the court wrote in the Dec. 6 opinion. “Chapman violently seized Walls only because Chapman mistakenly thought Walls was videotaping the officers. There was no evidence that Chapman’s actions were compelled by necessity and exigency. Walls was injured in the arrest and then died. Assuming the truth of the facts as pleaded, Chapman violated clearly established law.”
Judges E. Grady Jolly, Kurt D. Engelhardt and Andrew S. Oldham sat on the panel.
The Walls family is represented by William Kendig Jr. of Rice & Kendig in Shreveport, Louisiana.
Chapman and the sheriff’s department are represented by Joseph S. Woodley and Marshall Perkins of Pettiette, Armand, Dunkelman, Woodley, Byrd & Cromwell in Shreveport, Louisiana.
The case number is 23-30253.