In this edition of Litigation Roundup, the Texas Supreme Court issues a precedent-setting opinion on when “good cause” excuses a missed filing deadline, Attorney General Ken Paxton hires outside counsel to go after drug makers and pharmacy benefit managers in a lawsuit alleging a conspiracy to increase insulin prices, and a fight between San Antonio and Southwest Airlines over gate space heats up.
The Litigation Roundup is a weekly feature highlighting the work Texas lawyers are doing inside and outside the state. Have a development we should include next week? Please let us know at tlblitigation@texaslawbook.net.
Galveston County District Court
AG Says TikTok Violating Parental Consent Law, Sharing Minors’ Personal Data
TikTok Ltd. and three of its related entities have been named as defendants in a lawsuit brought by the state of Texas, accusing the social media company of violating the Securing Children Online through Parental Empowerment Act, also known as the SCOPE Act.
The act prohibits platforms like TikTok from sharing or selling the personal identifying information of minor children without parental consent and requires social media companies provide parents with tools to manage the privacy settings on the accounts of their children.
In the lawsuit, Texas alleges that TikTok is collecting dates of birth, phone numbers, email addresses and more personal identifying information “whenever a minor interacts with TikTok” and has failed to “create and provide parents and guardians with the tools legally required to protect minors’ privacy and safety.”
Texas Attorney General Ken Paxton said in a news release he is seeking up to $10,000 in civil penalties for each violation of the law.
The case was filed Oct. 3 and has been assigned to Galveston County District Judge Lonnie Cox.
Counsel for TikTok had not filed an appearance as of Monday.
Texas is represented by assistant attorneys general Tyler Bridegan, Madeline Fogel and Summer R. Lee.
The case number is 24-CV-1763.
Harris County District Court
Patriot Natural Gas Awarded $16M in Contract Dispute with PetroQuest Energy
A dispute over an oil and gas purchase and sale agreement between Patriot Natural Gas and PetroQuest Energy has been resolved in Patriot’s favor following a bench trial and an agreed final judgment awarding Patriot about $12 million in actual damages, $3.6 million in attorney fees and about $500,000 in costs.
The lawsuit was filed Nov. 9, 2022, according to court records, with Patriot accusing PetroQuest of misrepresenting the structural integrity and “environmental defects” of the east Texas oil and gas assets — including 30 horizontal wells — that Patriot had agreed to purchase for $115 million.
Patriot filed suit after PetroQuest refused to return its $11.5 million deposit and the parties agreed to proceed to a bench trial before Harris County District Judge Donna Roth.
The court found Patriot proved damages totaling $11.9 million but found Patriot had failed to carry the burden to prove common law and statutory fraud, fraudulent inducement and fraud by omission.
Before the second part of the bench trial court could take place, which would have determined attorney fees and costs, the parties alerted the court that they had reached a settlement, with PetroQuest agreeing to pay $481,000 to Patriot for out-of-pocket costs and $3.6 million in attorney fees.
Judge Roth signed an agreed final judgment in the case Sept. 30.
Patriot is represented by Brice A. Wilkinson, Robin C. Gibbs, Mark Doré, L. Bruce Baldree and Sydney Ballesteros of Gibbs & Bruns.
PetroQuest is represented by Jason A. Newman, Tiffany Means and John M. Baker of Baker Botts.
The case number is 2022-74164.
Hilcorp Ventures Gets Win in Wrongful Death Lawsuit
Hilcorp Ventures, a company that owns and operates a downtown parking garage in Houston, was recently cleared in a wrongful death lawsuit brought by the spouse of a man who fell while walking through the structure.
The lawsuit was filed in July 2020 by Maynard Johnson, who alleged he tripped and fell in a downtown Houston parking garage in July 2019 after encountering “an unmarked gap in the pavement” and suffered serious injuries as a result. In a third amended petition, counsel for Johnson informed the court he died Oct. 11, 2022, and that his spouse would pursue the lawsuit against Hilcorp in his place.
Hilcorp argued that Johnson’s contributory negligence barred the claims and that the condition that caused the injuries was “open and obvious.” In its motion for summary judgment, the company argued that Johnson had injured his shoulder in the fall and, more than three years later, died from complications of multiple system atrophy.
“[I]t is unquestionable that Mr. Johnson’s July 2019 fall did not cause his death,” Hilcorp argued.
In a final order signed Sept. 30 by Harris County District Judge Kristen Hawkins, she granted Hilcorp a no-evidence and traditional partial summary judgment dismissing the wrongful death claim.
Hillcorp is represented by Steven J. Mitby and Debbie Simon Pacholder of Mitby Pacholder Johnson.
Johnson is represented by Jeffrey N. Todd of The Todd Law Group.
The case number is 2020-41863.
Travis County District Court
AG Taps Outside Counsel for Suit Alleging Conspiracy to Increase Insulin Prices
The law firms of Liston & Deas, David Nutt & Associates, the Cicala Law Firm and Forman Watkins Krutz have been hired by the office of the attorney general to represent Texas in a lawsuit against insulin manufacturers and pharmacy benefit managers accusing them of participating in a conspiracy that resulted in a 1,000 percent increase in the price of insulin.
Named as defendants in the lawsuit are Eli Lilly, Express Scripts, CVS Pharmacy, OptumRx, Novo Nordisk and Sanofi-Aventis, Caremark Rx, Medco Health Solutions, UnitedHealth Group and a handful of subsidiary or related companies.
Texas alleges that the pharmacy benefit managers, who “act as the gatekeepers to the pharmaceutical market,” were paid a portion of the profits reaped from the higher-priced insulin by the drug manufacturers who “artificially inflated their list prices” for the drug. In turn, the pharmacy benefit managers gave preference to manufacturers who had the highest list price and excluded lower-priced insulin, the lawsuit alleges.
“This is a disturbing conspiracy by which pharmaceutical companies were intentionally and artificially inflating the price of insulin. Big Pharma insulin manufacturers and PBMs worked together to take advantage of diabetes patients and drive prices as high as they could,” Paxton said in a news release. “These companies acted illegally and unethically to enrich themselves, and we will hold them accountable.”
The lawsuit was filed Oct. 3 and has been assigned to Travis County District Judge Jessica Mangrum.
Counsel for the defendants had not filed an appearance as of Monday.
The case number is D-1-GN-24-007940.
Southern District of Texas
Summary Judgement Granted in Rail Terminal Construction Dispute
Savage Services recently secured a declaratory judgment that it doesn’t owe Cajun Industries any further compensation for its work on a rail terminal facility in Gregory, Texas, which is about 10 miles north of Corpus Christi.
U.S. District Judge Drew B. Tipton entered final judgment in favor of Savage on Sept. 24. Savage had turned to the courts in October 2022 after a dispute arose over what compensation Cajun was entitled to for the project that services the ExxonMobil and SABIC’s chemical facility.
Savage had agreed to pay Cajun a base “not to exceed” amount of $37.4 million. A counterclaim lodged by Cajun claimed that, as an incentive to work efficiently, Savage had also agreed “to pay Cajun 40% of any cost savings.”
“However, at the end of the project, Savage refused to properly calculate Cajun’s cost savings,” Cajun alleged in seeking to recover more than $2 million in damages it said Savage owed for work completed. “Savage’s improper calculation of Cajun’s cost savings fails because it violates the terms of the contract.”
Savage Services is represented by Steven J. Mitby and Debbie Simon Pacholder of Mitby Pacholder Johnson.
Cajun Industries is represented by Angela A.L. Connor, Sadiq Ali and Tiffany Harrod of Peckar & Abramson.
The case number is 4:22-cv-03405.
Western District of Texas
No TRO for Southwest Airlines in San Antonio Gate Fight
A request from Southwest Airlines that would have barred the city of San Antonio from entering into new leases with airlines for gate space at a to-be-constructed terminal at its international airport has been denied.
U.S. District Judge Xavier Rodriguez on Oct. 1 denied a motion for a temporary restraining order in the fight over gate allocation space at the San Antonio International Airport. Southwest Airlines filed this lawsuit Sept. 26, alleging the city’s plan to exclude Southwest Airlines from gate access in Terminal C — which has not yet been built and is slated to open in 2028 — constituted violations of the Supremacy Clause of the Constitution and the Airline Deregulation Act.
According to court documents, Southwest Airlines currently operates out of Terminal A and had a lease with the city that expired at the end of September. Southwest has refused to sign a new lease unless it is allocated gate space in Terminal C.
“The dispute between SWA and the city boils down to a contract dispute,” Judge Rodriguez wrote in denying the TRO. “The court is not persuaded by SWA’s claims that there is irreparable harm based on exclusion from Terminal C and a hit to its brand. SWA has 38% of the market share in San Antonio and it will not be kicked out of the airport due to its non–renewed lease. In fact, business will continue to operate as usual. No one appears to be canceling flights based on this action, and SWA remains the dominant airline in San Antonio.”
Judge Rodriguez explained that the purpose of a TRO is to maintain the status quo and here, that would mean “to let SWA continue to operate out of Terminal A — just as it has done for years at San Antonio International Airport. Because that will not change, there is no irreparable injury.”
Southwest Airlines is represented by Mark G. Sessions, Forest M. “Teo” Seger III, Charles Hayes and M. Roy Goldberg of Clark Hill, and Lawrence Morales II of The Morales Firm.
San Antonio and its director of airports are represented by Erica Benites Giese of Jackson Walker and W. Eric Pilsk, Eric T. Smith, Steven L. Osit and Sarah E. Wilbanks of Kaplan Kirsch.
The case number is 5:24-cv-01085.
First Court of Appeals, Houston
No En Banc Reconsideration in Case Where Court Axed $222M Wrongful Death Verdict
A majority of justices on the First Court of Appeals in Houston on Thursday voted against reconsidering a panel’s May ruling that wiped out a $222 million wrongful death verdict that a Fort Bend County jury awarded to a widow whose husband was killed on the job.
A two-sentence order from the court, issued Oct. 3, means Kansas resident Kelli Most will have to appeal to the Texas Supreme Court for a chance to have the award reinstated. Most had argued that the appellate court panel’s decision to side with Team Industrial Services, dismiss the appeal and vacate the award on grounds that Texas was an inconvenient forum was “literally unprecedented.”
The panel determined the lawsuit should have been litigated in Kansas, where Most and her husband Jesse Henson lived, and where he died in an on-the-job incident at coal-fired power plant Jeffrey Energy Center. The forum non conveniens ruling came after Team Industrial Services, a Sugar Land-based company, had unsuccessfully attempted pretrial to get the appellate court to move the suit out of Texas courts.
“Until now, no Texas appellate court has ever ordered dismissal for forum non conveniens after an unsuccessful mandamus proceeding and after a trial on the merits,” Most argued in seeking en banc reconsideration. “If left uncorrected, the impact of the panel’s grievous errors will extend far beyond this case, threatening unsustainable confusion on a host of issues throughout trial courts in ten counties — if not more broadly. It need not be so. The court should grant reconsideration en banc.”
The case has received significant amicus attention.
Team Industrial is represented by Russell Hollenbeck, Brian J. Cathey and Michael J. Adams-Hurta of Wright Close & Barger, Wallace B. Jefferson, Robert B. Dubose and William J. Boyce of Alexander Dubose & Jefferson and Eileen F. O’Neill and Paul Smith of Ware, Jackson, Lee, O’Neill, Smith & Barrow.
Most is represented by Daryl L. Moore of Ahmad Zavitsanos & Mensing, S. Scott West of The West Law Firm, Kyle D. Hawkins of Lehotsky Keller Cohn and Jason A. Itkin, Andrew R. Gould, Brian M. Christensen and Cory D. Itkin of Arnold & Itkin.
The case number is 01-22-00313-CV.
Texas Supreme Court
Justices Clarify ‘Good Cause’ for Summary Judgment Response Filing Delay
In an eight-page per curiam opinion issued Friday, the justices determined Dallas County District Judge Eric Moyé got it wrong when he denied one party’s motion to file a one-day late summary judgment response.
In a personal injury and negligence lawsuit Georgia and Cindy Verhalen filed against Adriana Akhtar and Evan Johnston, the defendants filed separate motions for summary judgment, setting deadlines to respond to those motions of Sept. 28, 2022, and Oct. 6, 2022.
“Then, on Sept. 28 (the day the first response was originally due), Johnston and Akhtar filed amended notices resetting both motions to be heard in a single hearing on Oct. 12, resulting in a new combined response deadline of Oct. 5,” the court explained in Friday’s opinion.
The Verhalens filed responses to the motions at 11:48 p.m. Oct. 6 and explained in a motion for leave to file the late responses that a calendaring issue arose after the rescheduling of the hearings ‘in the case management software used by plaintiffs’ counsel.” The Verhalens argued allowing the late-filed response wouldn’t delay the case or cause prejudice and said it was the missed deadline was “a mere mistake and not the result of conscious indifference.”
“The court denied the motion for leave, noting that ‘we kind of do have a reputation around here for being sticklers for the rules,’ and that this result was the ‘tragic magic’ of summary judgment practice in Texas,” the opinion reads. “The court went on to grant both motions for summary judgment, awarding take-nothing judgments to both defendants.”
The court of appeals in Dallas affirmed that ruling, holding the Verhalens “did not provide even a slight excuse for the delay in filing the responses.”
The Texas Supreme Court determined the Verhalens’ lawyer had demonstrated she did not act with conscious indifference in missing the deadline, had taken responsibility for the mistake and “took the initiative to correct it” by filing an affidavit explaining the delay within 24 hours of the deadline.
“When a litigant demonstrates good cause to file a late response to a motion for summary judgment, the trial court must allow the filing,” the justices held. “We hold that when, as here, a litigant shares the response with the opposing party one day after the response deadline, files an affidavit explaining that the late filing was the result of a mere mistake, and no prejudice will result to the opposing party, the denial of that motion is an abuse of discretion.”
Chad Baruch of Johnston Tobey Baruch, who represented the Verhalens, issued a statement that he was “pleased” with the reversal.
“The court recognized that our clients’ late filing resulted from a simple calendaring mistake, not willful disregard for the legal process,” he said. “This decision reaffirms the principle that fairness should prevail when mistakes are made in good faith.”
The Verhalens are also represented by Randy Johnston of Johnston Tobey Baruch.
Akhtar and Johnston are represented by Kristi L. Kautz, David C. Colley and Douglas D. Fletcher of Fletcher, Farley, Shipman & Salinas.
The case number is 23-0885.