In this edition of Litigation Roundup, the Fifth Circuit asks the Texas Supreme Court to answer two certified questions, a team of Austin lawyers are hired to represent Twitter in a $90 million suit against Wachtell and Texas Instruments sues a slew of insurers over damage to its clean room.
Have a development we should cover in the next Litigation Roundup? Please let us know at tlblitigation@texaslawbook.net.
Dallas County District Court
Texas Instruments Seeks Millions from Insurers for Damage to ‘Clean Room’
Texas Instruments has filed suit against 11 of its insurers, alleging they must foot the bill for damage caused to a “clean room” facility after a hydrogen chloride gas pipe broke in June 2021.
When the pipe broke, Texas Instruments alleges, “large amounts” of hydrogen chloride gas were released into the clean room, damaging equipment and limiting the company’s ability to manufacture new material “for a period of time.”
Among the insurers named are Great Lakes Insurance SE, Zurich American Insurance and AIG Specialty Insurance. Texas Instruments told the court that while the insurers agreed to pay some of its claim, they refused to cover the full amount of the loss.
The lawsuit, filed June 15, seeks unspecified damages in excess of $1 million, and Texas Instruments alleges that a $5 million sub-limit on a policy covering “accidental gas and liquid discharge” doesn’t apply to its claim here.
The case has been assigned to Judge Dale Tillery.
Texas Instruments is represented by David Taubenfeld, Natalie Dubose and Alexander M. Clark of Haynes Boone.
Counsel for the insurers had yet to file an appearance as of Monday.
The case number is DC-23-08135
Western District of Texas
Horizon Bank Challenges Constitutionality of New Law
Horizon Bank has filed suit against Lt. Gov. Dan Patrick, Speaker of the Texas House of Representatives Dade Phelan and state Comptroller Glenn Hegar, alleging a law that was signed by the governor on June 18 is unconstitutional.
In the lawsuit filed June 20, Horizon claims it entered into a 10-year lease agreement with the Texas Permanent School Fund Corporation in June 2022, under which the bank agreed to construct a new office building for TPSFC. That entity is responsible for managing the state’s $52 billion permanent school fund.
The agreement was reached in part based on representations TPSFC made about the likelihood it would receive appropriations from the legislature to meet its lease obligations.
TPSFC told Horizon there was an “extremely low” risk that lawmakers wouldn’t appropriate adequate funds for it to fulfill its lease obligations, the suit alleges.
“But on or around June 18, 2023, Texas Governor Greg Abbott signed into law the General Appropriations Bill for the 2024-2025 biennium, which contains a budget rider (‘rider 7’) that purports to forbid the PSFC from using any of the funds appropriated to it to fulfill its obligations under the lease agreement with Horizon Bank,” Horizon alleges, and the rider “appears to require that the PSFC — and by extension, the state of Texas — default on its contractual obligations to Horizon Bank once H.B. 1 takes effect on September 1, 2023.”
The case has been assigned to U.S. District Judge Robert Pitman.
Horizon is represented by Jessica Underwood, Robert Cutler and Bradley Beckworth of Nix Patterson and Alton Rigby Jr. and William Duncan of Rigby Slack Lawrence Berger Akinc Pepper + Comerford.
The state officials had not yet retained counsel as of Monday.
The case number is 1:23-cv-00691.
Northern District of Texas
Answer Due Soon in ESG Class Action Against American Airlines
U.S. District judge Reed O’Connor has given American Airlines and Financial Engines Advisors until Aug. 4 to file an answer to a proposed class action lawsuit alleging the airline’s decision to engage in environmental, social and governance policy decisions are hurting the 401(k) accounts of employees.
American Airlines pilot Bryan P. Spence, of Aledo, Texas, filed suit June 2 alleging he suffered “financial harm” because of his employer’s “unlawful conduct.” Spence told the court that ESG funds underperform compared to the broader market, with an average return of 6.3 percent compared to 8.9 percent.
“An [Employee Retirement Income Security Act] plan manager is not acting solely in the interests of the plan participants and beneficiaries, and is breaching its duty of loyalty, if it uses an ESG investment strategy or offers a selection of funds to self-directed individual accounts that utilize an ESG strategy,” Spence alleges.
American Airlines has invested millions of its employees’ retirement savings “with investment managers and investment funds that pursue leftist political agendas through ESG strategies, proxy voting, and shareholder activism — activities which fail to satisfy these fiduciaries’ statutory duties to maximize financial benefits in the sole interest of the plan participants,” Spence alleges.
The plaintiffs are represented by Andrew Stephens and Heather Hacker of Hacker Stephens and Rex A. Sharp of Sharp Law.
American Airlines is represented by Russell D. Cawyer and Dee J. Kelly Jr., of Kelly Hart & Hallman and Brian D. Boyle, Mark W. Robertson, Shannon Barrett and William Pollak of O’Melveny & Myers.
The case number is 4:23-cv-00552.
Dallas County Jailers, Suing Over Discriminatory Scheduling, Bring Another Suit for Retaliation
Two female jailers who were among a group of nine suing Dallas County in February 2020 over what they allege was a discriminatory scheduling policy that only allowed male officers to have full weekend off are bringing a second suit against their employer alleging the county has taken “materially adverse actions against plaintiffs in retaliation for plaintiff’s ongoing litigation.”
Debbie Stoxstell and Felesia Hamilton filed this lawsuit June 23, alleging they suffered the retaliatory actions soon after their initial lawsuit was argued before the Fifth Circuit. An original panel of the Fifth Circuit had affirmed the district court’s dismissal of the jailers’ lawsuit.
But in October, the court vacated its August ruling and calendared the case for en banc arguments, which took place in January.
The en banc court has not yet issued an opinion.
The case has been assigned to U.S. District Judge Sam A. Lindsay.
The jailers are represented by Jay D. Ellwanger and David Henderson of Ellwanger Henderson and James A. Vagnini of Valli Kane & Vagnini.
Counsel for Dallas County had not filed an appearance as of Monday.
The case number is 3:23-cv-01410; the Fifth Circuit case number is 21-10133.
California Superior Court, San Francisco
Austin Attorneys Rep Twitter in $90M Suit Against Wachtell
Wachtell Lipton Rosen & Katz is being sued by Twitter’s parent company, X Corp., for unjust enrichment and breach of fiduciary duty stemming from a $90 million fee the firm received 10 minutes before Elon Musk completed his buyout of the company in October 2022.
“Wachtell exploited a corporate client left unprotected by lame duck fiduciaries who had lost their motivation to act in Twitter’s best interest pending its imminent sale to Elon Musk,” the suit filed July 5 alleges.
X Corp. is represented by William T. Reid IV, Joshua J. Bruckerhoff, Scott D. Saldaña, Aaron Brown and Julia Di Fiore of Reid Collins & Tsai’s Austin office and Marc Dworsky of the firm’s Santa Barbara office.
X Corp. alleges that Wachtell solicited “a handout” and aided and abetted “corporate waste by former Twitter executives in the death throes of their fiduciary roles and walk[ed] away with a total fee that made it $90 million richer.”
Counsel information for Wachtell wasn’t available Monday.
The case number is CGC-23-607461.
U.S. Court of Appeals for the Fifth Circuit
Certified Questions Sent to SCOTX in Wells Fargo Loan Spat
A panel has asked the Texas Supreme Court to answer two questions interpreting state law in a dispute between Linda and Thomas Moore Jr. and Wells Fargo stemming from their failure to repay a $170,700 loan.
The Moores argue Wells Fargo missed the four-year statute of limitations to foreclose and impermissibly tried to simultaneously rescind the acceleration and re-accelerate the loan. Wells Fargo argues that it satisfied the notice requirements for recission under state law.
In the opinion issued July 7, the court pointed out conflict in a 2018 decision from the Fifth Circuit in Wilmington Trust v. Rob, which the Moores argue supports their position that Texas law imposes notice requirements before acceleration, and an August 2022 holding from the First Court of Appeals in Houston that, according to the Fifth Circuit, “blessed simultaneous recission and re-acceleration.”
The two questions are:
- May a lender simultaneously rescind a prior acceleration and re-accelerate a loan under Texas Civil Practice & Remedies Code section 16.038?
- If a lender cannot simultaneously rescind a prior acceleration and re-accelerate a loan, does such an attempt void only the re-acceleration, or both the re-acceleration and the rescission?
U.S. District Judge Sim Lake entered final judgment granting Wells Fargo’s motion for summary judgment and dismissed the case with prejudice Feb. 9, 2022.
The Moores filed notice of appeal the following month.
Judges James E. Graves Jr., James C. Ho and Stuart Kyle Duncan sat on the panel.
The Moores are represented by Jeffrey Craig Jackson of Jeffrey Jackson & Associates.
Wells Fargo is represented by Daniel Durell of Locke Lord.
The case number is 22-20138.
Jury’s $1.5M Award Against 24-Hour Fitness Reinstated
In a July 7 ruling the Fifth Circuit held that a judge in the Northern District of Texas had wrongly wiped out a jury’s award of about $1.5 million to Harold Sauls and Linda Sauls in a premises liability suit against 24 Hour Fitness USA and reinstated the award.
The panel found there was ample evidence supporting the jury’s finding that 24 Hour was liable to injuries suffered by Harold Sauls in 2018 when he was touring a facility in Texas and fell into a drained hot tub. The jury found 24 Hour was 90 percent liable.
24 Hour had argued that the empty hot tub was an “open and obvious condition” and that it therefore had no duty to warn about the danger.
U.S. District Judge Reed O’Connor had entered final judgment in November 2019, granting 24 Hour’s motion for judgment as a matter of law, vacating the jury’s verdict and held that case law overwhelmingly “supports the conclusion that the hot tub is an open and obvious condition as a matter of law.”
The Saulses filed notice of appeal in February 2022. The panel detailed some evidence in the record in its six-page ruling, including that Harold Sauls was 79 years old at the time, had a hearing impediment and had no prior knowledge of the facility or its hot tub. The empty hot tub was located about five feet from a door and Sauls’ “attention was simultaneously diverted away from the hot tub by 24 Hour Fitness’ tour guide,” the court wrote.
“Thus, drawing all reasonable inferences in favor of appellants and to the jury verdict … we find there is a legally sufficient evidentiary basis for a reasonable jury to find for appellants,” the panel held.
Judges Patrick E. Higginbotham, James E. Graves Jr. and Dana M. Douglas sat on the panel.
The Saulses are represented by Kevin Cramer O’Byron of O’Byron & Schnabel in New Orleans.
24 Hour Fitness is represented by Jessica Z. Barger and Brian James Cathey of Wright Close & Barger and Nelson D. Skyler of Brown Sims.
The case number is 22-10182.