In this week’s edition of litigation roundup, a team from Norton Rose Fulbright wins dismissal of a lawsuit over a never-realized business acquisition, Oncor wins an appeal in Austin in a suit over the valuation of its transmission lines, and a constitutional challenge to a state law governing transmission lines gets expanded by the Fifth Circuit.
Have a development you think is worthy of a mention in the next Litigation Roundup? Please let us know at firstname.lastname@example.org.
Southern District of Texas
Suit Over Failed Business Transaction Booted from Texas Court
Houston-based Vortex, a provider of water, sewer and industrial pipe services, cannot hale into Texas courts the Swiss and German companies it attempted to acquire, a federal judge recently ruled.
U.S. District Judge Andrew Hanen explained in a 10-page order he signed Nov. 29 that neither Amex Sanivar AG nor Amex Sanivar GmbH had the minimum contacts with Texas required for the lawsuit to proceed here.
Judge Hanen wrote that from the outset, it was always Vortex approaching Amex in hopes of acquiring the companies, but Amex has never done business in Texas and none of its agents or representatives have ever visited the state.
“Although Amex may have communicated via email or telephone with Vortex during negotiations, this alone is not enough to establish minimum contacts,” Judge Hanen wrote. “The Fifth Circuit has consistently held that communications and negotiations between the parties do not create the minimum contacts needed in a breach of contract action for jurisdiction in Texas.”
Vortex alleged the dispute was caused by Amex’ “bad faith conduct in connection with the proposed acquisition.” Amex had agreed, Vortex alleged in the lawsuit, to exclusively negotiate with it about the possible acquisition.
“Amex flagrantly violated these contractual requirements of exclusivity and confidentiality by not only conducting parallel negotiations with competing companies while the exclusivity provision remained in effect but also disclosing information about its dealing with Vortex to those third parties in hopes of garnering a larger offer from those competing companies,” Vortex alleged.
Vortex filed suit in Harris County District Court in September 2021, and Amex removed it to federal court in May, according to court records, filing a motion to dismiss the suit on jurisdictional grounds that same month.
Vortex is represented by Logan E. Johnson and Varant Yegparian of Schiffer Hicks Johnson.
The case number is 4:22-cv-01614.
Northern District of Texas
Polsinelli Hit with Malpractice Suit by Aviation Fuel Co.
Aviation fuel company World Fuel Services Corp. is alleging the law firm Polsinelli, which represented it as a creditor in a Texas bankruptcy proceeding against Evergreen Helicopters, made a negligent mistake in the course of that representation that jeopardizes its ability to recoup $14.5 million it is seeking to recover in unpaid fuel bills and interest.
World Fuel Services filed the lawsuit Dec. 2, alleging that Polsinelli named the wrong defendant when it filed the bankruptcy claim. Instead of naming Evergreen Helicopters Inc., the law firm named Evergreen Helicopters International Inc. and Erickson Inc. “despite having all information necessary for it to name the proper party.”
That error compromised World Fuel Services’ position as a creditor and forced it to negotiate a settlement “from a position of great weakness” that was “far less than the full amount of its claim.”
The case has been assigned to U.S. District Judge Karen Gren Scholer.
World Fuel Services is represented by Brooke Claire Bahlinger of Foley & Lardner.
Defense counsel had not appeared as of Monday.
The case number is 3:22-cv-02692.
Central District of California
Guns N’ Roses Takes Aim at Texas Firearm Dealer
Famed rock band Guns N’ Roses is accusing a Houston-based business of trademark infringement and dilution in a recently filed lawsuit.
The suit names Jersey Village Florist, which operates Texas Guns and Roses and a website of the same name, as the defendant. Guns N’ Roses alleges that the company sells firearms, weapons and accessories and that while it claims to sell flowers, the band called that “a contrivance to purportedly justify defendant’s wholesale appropriation of the Guns N’ Roses mark.”
The Houston company hasn’t sought registration of its mark in connection with the selling of flowers, the band alleges.
“GNR, quite reasonably, does not want to be associated with defendant, a firearms and weapons retailer,” the suit reads. “Furthermore, defendant espouses political views related to the regulation and control of firearms and weapons on the website that may be polarizing to many U.S. consumers.”
Texas Guns and Roses filed an application to register its trademark in October 2014, and the U.S. Patent and Trademark Office registered TexasGunsandRoses.com for retail firearms sales in November 2016, according to the lawsuit.
After the band’s cease and desist letters went unanswered, Guns N’ Roses moved to have the registration canceled in November 2021 and filed this lawsuit on Dec. 1, according to court records.
Guns N’ Roses is represented by Jill M. Pietrini and Paul A. Bost of Sheppard Mullin Richter and Hampton.
Counsel for Jersey Village Florist had yet to appear as of Monday. The case has been assigned to U.S. Magistrate Judge Margo A. Rocconi.
The case number is 2:22-cv-08728.
Third Court of Appeals
Oncor Gets Appraisal Dispute Revived
A lawsuit filed by Oncor Electric Delivery Company over an alleged error in the Mills County appraisal roll for 2019 was improperly dismissed by the trial court over jurisdictional issues, an intermediate appellate court has determined.
The suit against Mills Central Appraisal District and Mills County Appraisal Review Board is one of several filed by Oncor over the valuation of transmission lines in 13 Texas counties, including Mills County. Oncor acquired the property in 2019 from Sharyland Distribution & Transmission Services. Oncor claims errors in calculating the value of the lines resulted in it being overcharged $7 million in property taxes.
Privately owned electric transmission lines are subject to property taxation. Sharyland and the appraisal district settled a protest in June 2019 for appraisal value of $78.8 million. In December 2019, several months after the acquisition, Oncor said it discovered an error in the Mills County appraisal roll that misstated the number of miles of two types of transmission lines. The value was overstated by approximately $50 million because it was derived from incorrect mileage information, Oncor said.
In January 2020, Oncor filed motions with the review board seeking to correct the alleged clerical error. The appraisal district convened a hearing on the motions but dismissed them, concluding that it did not have jurisdiction to rule on them. In April 2020, Oncor filed the lawsuit seeking review of the matters it had presented to the review board. The trial court signed an order granting the appraisal district’s plea to the jurisdiction but also stating that the “case” was dismissed.
The appeal presented several jurisdictional issues. The Third Court of Appeals panel made the following holdings:
- The trial court’s order to dismiss Oncor’s cause of action against the appraisal district was not a final judgment and, accordingly, Oncor’s claim against the review board is still pending in the trial court.
- The trial court did not lack jurisdiction merely because the review board had dismissed Oncor’s motions for lack of jurisdiction rather than ruling on the merits.
- An agreement with the appraisal district made by previous owner Sharyland does not preclude Oncor’s challenge to an appraisal roll under the mutual-mistake doctrine.
The opinion was written by J. Woodfin Jones, a retired chief justice of the court who was sitting by assignment. Other panel members were Justices Thomas J. Baker and Edward Smith.
Jones cited the Texas Supreme Court’s 2018 opinion in Willacy County Appraisal District v. Sebastian Cotton & Grain, Ltd. In answering the question regarding the appraisal district’s agreement with Sharyland, Jones noted that the Seventh Court of Appeals in October came to the opposite conclusion in a similar case brought by Oncor in Wilbarger County. The Amarillo court of appeals concluded that Sharyland’s agreement precluded Oncor’s suit, reversed the trial court’s order and rendered judgment granting the appraisal district’s pleas to the jurisdiction.
“For the reasons previously discussed in this opinion, we respectfully disagree with the result reached in Wilbarger and therefore decline to follow it,” Jones said.
Oncor is represented by David H. Gilliland and Marnie A. McCormick of Duggins Wren Mann & Romero.
Mills Central Appraisal District represented by James R. Evans Jr., Peter William Low and E. Barry Gaines of Low Swinney Evans & James. Mills County Appraisal Review Board is represented by Julia Lacy Armstrong and Roy L. Armstrong of Taos, New Mexico.
The case number is 03-21-00027-CV.
Fifth Circuit Court of Appeals
Panel Expands Challenge to Texas Transmission Line Law
A challenge to a Texas state law that some argue violates the dormant commerce clause has grown after a recent ruling allowed five parties to intervene, reversing a trial court’s decision.
In a ruling issued Dec. 7, an appellate panel determined that five third-party entities have standing to intervene in the lawsuit challenging S.B. 1938, which allows only entities that already own transmission lines in Texas the power to build and operate transmission lines in the state.
Entergy Texas Inc., Oncor Electric Delivery Co. and Southwestern Public Service Co., all entities that currently own transmission lines in Texas and hold the rights of first refusal, were allowed into the suit to defend SB 1938. LSP Transmission Holdings II and East Texas Electric Cooperative Inc., which are prevented from building transmission lines by SB 1938, were allowed to intervene in the suit to oppose the law’s constitutionality.
The court held that the three parties seeking to defend SB 1938 “have shown that their interests may diverge from the Texas Commissioners defending the law.” Similarly, LSP and ETEC have shown their interests in this dispute “may diverge from NextEra’s.”
“Because Entergy, Oncor, SPS, LSP, and ETEC have protectable interests that may be impaired or injured by the outcome of this lawsuit and because Entergy, Oncor, SPS, LSP, and ETEC have shown that the present parties may not adequately represent their interests, Entergy, Oncor, SPS, LSP, and ETEC are entitled to intervene as of right,” the court held.
NextEra is trying to vindicate its awarded contract to build the Hartsburg-Sabine Line in East Texas. NextEra won the contract with a proposal that it would cost $114.8 million to build the line. But before construction began, Texas lawmakers passed SB 1939 which prohibited the Florida-based NextEra, which did not already own or operate transmission lines in Texas, from proceeding.
NextEra filed this suit against the Public Utility Commission of Texas and its commissioners June 17, 2019.
The companies attempting to intervene in the lawsuit appealed to the Fifth Circuit in March 2020, according to court documents, after a trial judge concluded “the existing parties adequately protect th[eir] interest[s].”
Circuit Judges James L. Dennis and Jennifer Walker Elrod sat on the panel that decided the case by a quorum.
NextEra is represented by Stuart H. Singer and Pascual Armando Oliu of Boies Schiller & Flexner and Jeff Tillotson of Tillotson Johnson & Patton.
PUCT is represented by Lanora Pettit of the Texas attorney general’s office.
LSP is represented by Paul D. Clement and Erin Murphy of Clement & Murphy, Tabitha De Paulo and Kasdin M. Mitchell of Kirkland & Ellis. ETEC is represented by Lawrence Bradley Hancock, Mark C. Davis, Jacob Lawler and Theresa M. Wanat of Holland & Knight.
Entergy is represented by Michael Andrew Boldt, Catherine Garza and Lino Mendiola III of Eversheds Sutherland. Oncor is represented by Thomas S. Leatherbury, Ethan James Nutter and John C. Wander of Vinson & Elkins. Southwestern Public Service is represented by Matthew E. Price of Jenner & Block.
The case number is 20-50168.
Editor’s Note: Janet Elliott contributed to this report.