The six-year bear of a legal battle between the Electric Reliability Council of Texas and Panda Power has again reached the Texas Supreme Court.
In what is likely the most highly watched civil litigation pending in Texas, ERCOT wants the state’s highest court to declare that it is part of the state government and thus immune from civil lawsuits.
But Dallas-based Panda claims ERCOT knowingly produced false market data in 2011 and 2012 that led it to invest $2.2 billion to build three new power plants – operations that did not generate the revenues that ERCOT predicted.
Panda claims that ERCOT committed fraud, negligent misrepresentation and breach of fiduciary duty and is demanding hundreds of millions of dollars in damages.
But ERCOT faces an even bigger problem than Panda’s case. There are hundreds of lawsuits pending in Houston and Austin seeking billions and billions of dollars from ERCOT for its mishandling of Winter Storm Uri, when millions of Texans were without electric for days, scores of people died from apparent hyperthermia and power rates skyrocketed to hundreds of times the normal rate.
ERCOT lawyers see the Panda litigation, which has nothing to do with Winter Storm Uri, as a way of escaping all of those lawsuits by convincing the state justices to declare that ERCOT is a state agency immune from civil lawsuits and that any complaints against it must be handled by the Texas Public Utility Commission.
In February, the Dallas Court of Appeals, in a 12-1 en banc decision, stripped ERCOT of immunity and cleared the way for Panda to take its case to a jury.
Last month, lawyers for ERCOT asked the Texas Supreme Court to decide the issue once and for all.
“ERCOT is an arm of the state entitled to immunity to protect against lawsuits that would undermine its mission to protect the electric grid and shift its assets to a private market participant that has no obligation to guard the public interest,” Wallace Jefferson, a partner at Alexander Dubose & Jefferson, wrote in a 28-page petition for review.
“The en banc opinion [of the Dallas appeals court] divests Texas of its unique, plenary jurisdiction over the state’s electric grid, subjecting the grid’s reliability to the whims of private litigants,” wrote Jefferson, who is the former chief justice of the Texas Supreme Court. “The court’s profound error on immunity must not stand.”
The first step for ERCOT is convincing the Texas justices to agree to hear the appeal.
ERCOT v. Panda was at the Texas Supreme Court in March 2021, just weeks after Winter Storm Uri had wreaked havoc on the state’s power grid, which is managed by ERCOT. But the justices held five to four that the case was not procedurally ready to be decided and sent it back to the lower courts for further review.
Now, ERCOT is back.
“This court has already held that this case merits review,” Jefferson wrote in ERCOT’s petition. “Last term, it agreed to answer whether ERCOT is immune from suit and whether the PUC has exclusive jurisdiction over Panda’s claims against ERCOT arising from its statutory role. The need for answers to these critical questions has intensified in the wake of Winter Storm Uri and the litigation that has followed it; the same issues are pending in another petition before this court, as well as an MDL consolidating more than one hundred storm-related lawsuits.”
Lawyers for Panda obviously disagreed.
“ERCOT takes for granted that the court will grant review here simply because it did before,” the lawyers for Panda wrote. “But the Court doesn’t need full briefing or argument to see that the en banc Dallas court has now gotten it right: ERCOT is not immune from suit and the PUC has no exclusive jurisdiction over Panda’s common-law claims.”
“ERCOT’s petition should be denied because the court of appeals did not commit ‘an error of law of such importance to the state’s jurisprudence that it should be corrected.’ It committed no error at all.”
The Haynes and Boone lawyers argue that ERCOT is “not an arm of the state” but instead is a “private membership corporation regulated by the PUC.”
“The ultimate question here is whether ERCOT had a duty not to lie in meetings and proprietary reports about electricity supply and demand,” lawyers for Panda wrote. “Whatever the outcome in those other cases, Panda’s classically common-law fraud claims should be decided in the courts.
“Allowing ERCOT to escape accountability through the judicial backdoor would undermine these policy choices, impermissibly shift the risk of loss to injured parties, and shake the foundations of the competitive electricity market,” the Panda lawyers argued. “The Dallas court properly rejected ERCOT’s arguments; this Court need not say so again.”