Call this the June 24 mystery, the day ostensibly that final orders with opinions are issued in cases argued in the court’s term that ends in August.
Two of those cases were State of Texas v. Volkswagen Aktiengesellschaft (“public limited company”) and Texas v. Audi Aktiengesellschaft, involving VW and Audi’s special appearances contesting personal jurisdiction in the so-called emissions-cheating cases.
But on the court’s orders that Friday were two notable developments. The VW and Audi cases were abated. The order noted two justices recused: Jimmy Blacklock, who did not participate when the cases were argued in February, and Evan Young, who did. The last-minute abatement order was the first notice that Young removed himself from the case.
The court does not disclose a justice’s reasons for recusal. Justice Young said he would respect the court’s confidential deliberations, which in the absence of more certain information seems to suggest the decision to recuse might not have been his alone or that he consulted his colleagues on whether he had a conflict.
But from the court’s case information this much may be deduced: Young’s recusal evidently was at the last minute and led to its own conflict when, on the same day, Chief Justice Nathan L. Hecht asked Gov. Greg Abbott to commission two special justices. That was a sign that the court was locked without five justices. The lead counsel for the automakers, Jeffrey Wall of Sullivan & Cromwell’s Washington, D.C., office, cried foul because, he argued, by appointing tie-breaking justices Abbott was stacking the deck in the state’s favor – that is, the governor was violating due process by choosing justices in a high-stakes case against the state.
“Against that backdrop of state and federal law,” Wall wrote Chief Justice Hecht, “Governor Abbott may not permissibly commission judges to hear these cases. The State is the plaintiff in these suits, and allowing the State (through its Governor) to shape the composition of the tribunal would effectively allow the State to be the judge of its own cause.
”Put differently, it should be indisputable that Attorney General Paxton could not permissibly select judges to hear these cases. Invoking Section 22.005 here [the statute allowing the chief justice to request the governor to commission special justices] thus rests entirely on the notion that asking the Governor to do the same thing is somehow different. It is not …”
At the federal level, Wall argued, “procedural due-process protections do not allow the State to select judges for its enforcement action.”
But the state itself cried foul in a response requested by Hecht by 5 p.m. Monday: “Volkswagen’s arguments hinge on the idea that the Governor is essentially a petitioner in these cases. He is not,” wrote the state’s lead counsel, Assistant Solicitor General Lisa Bennett. “Not only is the Governor not a named party in these cases, but the Governor also is not functionally a party simply because of his status as a state official. The office of the Governor exercises duties and powers separate from those of the office of the Attorney General. The Court has recognized in a variety of contexts that it is improper to conflate different officers or agencies of the State.”
Because Volkswagen’s theory that the governor effectively is the state rests on the principle that state officials’ acts are considered acts of the state for sovereign-immunity purposes, Bennett’s response continues, “this theory would extend without limit to all state agencies and officials” and leave the governor unable to commission special justices for any case in which any state agency or its officials are involved.
“That approach would be deeply unfair to the State and its agencies,” Bennett wrote, “which would be left with no recourse in the highest civil court of the State whenever recusals result in the inability of the Court to reach the five-Justice concurrence needed to decide a case.”
If the court buys VW’s argument, and remains deadlocked short of the five-justice majority the Texas Constitution requires for a decision, the court of appeals’ holding in VW and Audi’s favor could be the law of the case and the Supreme Court could dismiss it as improvidently granted. The Austin Court of Appeals held 2-1 that personal jurisdiction does not exist to allow the state to sue the German automakers on its state-law claims.
James Alfini, South Texas College of Law dean emeritus and a judicial-ethics expert, said he would be surprised that Chief Justice Hecht might not be more sensitive to the “optics” where judicial impartiality is the issue. Volkswagen’s reliance on Caperton v. Massey to ground its due-process argument, Alfini said, is important if the statute permitting the chief justice to request the governor to choose temporary justices is discretionary and not mandatory.
Gaines West, a College Station practitioner versed in legal ethics who served on the Supreme Court’s Board of Disciplinary Appeals – the agency that handles attorney-misconduct appeals – said he believes Volkswagen’s point is to preserve its due-process complaint for higher review – by the U.S. Supreme Court. “You can’t presumptively preempt a judge,” West said.
The jurisdictional issue is whether VW and Audi “purposefully availed” themselves of legal protections afforded by Texas law. The Austin court concluded that VW and Audi’s conduct insufficiently established specific jurisdiction over them because their conduct was not directed specifically to Texas. The majority relied on the U.S. Supreme Court’s plurality in a 2011 case, J. McIntyre Machinery Ltd. v. Nicastro.
The dissent in the Austin Court of Appeals, by Justice Gisela Triana, concluded: The “alleged liability of VW Germany and Audi Germany arises from the purposeful recall-tampering activities that they controlled by directing VW Germany’s wholly owned subsidiary VW America to install the tampering software in Texas and elsewhere.”
“… VW Germany and Audi Germany undeniably profited by availing themselves of the Texas market, albeit indirectly through their relationships with VW America and its franchise dealerships, relationships that VW Germany and Audi Germany controlled through … Importer Agreements.”
According to court records, VW Germany and Audi Germany directed VW America to install the new tampering software by conducting a series of voluntary recall campaigns and by also installing the software on vehicles brought in for regular maintenance. The evasive software was installed on more than 23,000 Volkswagens at 60 Volkswagen dealerships in Texas and at least 486 Audis at 12 Audi dealerships in the state.
When the Texas Supreme Court heard the state’s appeal in February from the Austin court’s decision, only Justice Jimmy Blacklock recused himself. Blacklock came to the court in January 2018, appointed by Abbott. He had been Abbott’s general counsel and, before that, served in several positions in the Attorney General’s Office when Abbott was AG. During this time the U.S. Environmental Protection Agency, prompted by a whistleblower in 2015, began an investigation and the AG later began its lawsuit.
The VW entities settled the EPA’s criminal and civil actions for over $20 billion but did not obtain a release of liability from state and local governments, according to court records.
The Austin court heard VW and Audi’s appeal from a Travis County district judge’s decision denying special appearances in the state’s suit against VW Germany, Audi Germany and VW America for violations of the Texas Clean Air Act and for emissions tampering.
To establish personal jurisdiction over a foreign company, a court must find the company “purposefully availed” itself of the state’s benefits for the company’s business dealings in Texas.
The Supreme Court consolidated the VW and Audi cases.
In the Supreme Court the state argued that “VW Germany’s and Audi Germany’s contacts with Texas were ‘purposeful’ and they may not evade jurisdiction by also directing activities to other States.”
The court of appeals majority, the state argued, “acknowledged that ‘the evidence in the record establishes that VW Germany directed recall-tampering conduct toward the United States as a whole,’ but it held that Texas courts lacked jurisdiction because that conduct was not uniquely directed toward Texas. That holding rested on an overbroad reading of the plurality opinion in Nicastro.”
The “fortuitous arrival” of a product in a state is “far different from a worldwide based manufacturer [that] creates a United States subsidiary to sell product wherever the product can be sold, and which in fact succeeds to a significant extent in Texas.”
And that, the state contends, is especially distinct “from where not only were thousands of tampered cars sold in Texas, but also VW Germany and Audi Germany ‘later reached into Texas where those cars had been sold to tamper a second time with those cars.’”
“Because VW Germany’s and Audi Germany’s ‘purposeful contacts’ with Texas satisfy purposeful availment,” the state argues, “nothing in the Nicastro plurality suggests that Texas’s ability to hold those defendants to account should be stripped because they reached into other states for post-sale tampering, too.“
VW Germany and Audi Germany ‘targeted the forum,’ when they directed VW America to install tampering software on previously sold cars including those they knew to be on the road in Texas.”
The special-appearance case was argued by Bennett and Wall.
On brief for Volkswagen and Audi: Jeffrey Levinger, Levinger PC, Dallas, and Richard A. Sayles, Will Snyder, Bradley Arant Boult Cummings, Dallas, and Michael H. Steinberg (Los Angeles), Judson O. Littleton (Washington, D.C.), Robert J. Giuffra Jr. and William B. Monahan (New York), Sullivan & Cromwell.
On brief for the Texas AG: Patrick K. Sweeten, deputy attorney general for special litigation, Nanette DiNunzio, associate deputy attorney general for civil litigation.