In this edition of Litigation Roundup, three former federal judges in Texas join more than two dozen of their colleagues in urging the U.S. Supreme Court to reject President Donald Trump’s tariff regime, the parties involved in an East Texas water fight reach an agreement and a math lesson from the Dallas Court of Appeals wipes out a $26.9 million prejudgment interest award.
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.
Loving County District Court
Paxton Touts TRO in ‘Political Takeover’ Case
Earlier this month, Attorney General Ken Paxton announced he was filing a lawsuit against a man who has been encouraging his followers to join him and move to Loving County in remote West Texas, accusing him of violating the health and safety code by not having utilities, including a sewage system, in place to support the influx of people.
And now, the state has secured an emergency ex parte temporary restraining order against Malcolm Terall Tanner, barring him from discharging any sewage or human excrement in a way that could contaminate the soil and also ordering that he “refrain from allowing any person to move on to, reside, or otherwise establish habitation or domicile” on the property he owns in Mentone, Texas.
In the 22-page lawsuit, Texas alleges Tanner “boasts that his goal is to overthrow the local government in Loving County and run for president in 2028.”
Loving County, located in the Permian Basin, is home to only 64 permanent residents but has a taxable value of more than $18 billion. Tanner, according to the lawsuit, purchased two adjoining five-acre tracts of land in Loving County and has been encouraging his followers to join him by “offering a free place to live on the property and $5,000 per month.”
“However, the property lacks sewer access, septic systems, running water, has limited electricity produced by gas powered generators, and has a burn pit dug in the ground to dispose of trash,” the lawsuit alleges. “Due to the lack of septic and sewer access and the increasing number of individuals inhabiting the land, the State believes that Tanner is violating or threatening to violate Chapter 341 of the Texas Health and Safety Code. The property is also used as a meeting place for Tanner and his co-conspirators to plan organized criminal activity. The state asks the Court to enjoin Tanner from continuing these illegal activities and assess civil penalties.”
In a press release, Paxton said Tanner’s “deceptive and unlawful scheme to lure people with free housing for the purpose of conducting a political takeover is a disgustingly fraudulent plot to line his own pockets.”
Loving County District Judge Alan J. Nicholas signed the order Oct. 15 and set a hearing on the motion for temporary injunction for Oct. 31 at 10 a.m.
Counsel for Tanner had not filed an appearance as of Monday.
Texas is represented by Lauren McGee of the attorney general’s office.
The case number is 25-151-DCCV-00050.
Cherokee County District Court
Permanent Injunction Entered in East Texas Water Fight
Sanderson Farms and a group of other plaintiffs have prevailed in a lawsuit against the Neches & Trinity Valleys Groundwater Conservation District after the parties reached an agreement on the terms of a permanent injunction in a fight over the handling of permit applications.
Sanderson Farms, a group of farmers and a water supply corporation had filed the lawsuit in August in response to what the plaintiffs called the “exploitation of limited precious groundwater resources,” alleging Dallas-based hedge fund manager Kyle Bass “manipulated the District’s process to his advantage (and to the detriment of the local communities) through improper board member participation.”
Bass’ companies allegedly filed permit applications with the Neches & Trinity Valleys GCD requesting authorization to drill 43 high-capacity water wells and ultimately produce more than 15 billion gallons of groundwater annually from the Carrizo-Wilcox Aquifer. He allegedly intends to export the groundwater outside the district and sell it for profit.
Bass’ companies allegedly hired one board member to drill more than 40 high-capacity wells. The director eventually resigned from the board. A second director also serves as a councilmember for the city of Palestine, the Anderson County seat, which the complaint argues makes him ineligible for appointment to the board.
“Thousands of residents and businesses protested the applications based on the impacts this large project will have on their wells, which are vital to their lives and livelihood,” the complaint reads. “Unfortunately, Mr. Bass and his entities only seem interested in returns on investments as opposed to impacts on existing users and the resource.”
Judge C. Michael Davis entered the final judgment and permanent injunction Oct. 23, in which he wrote that the parties had agreed to review and consider three studies before taking action on the contested applications. Those studies are:
- A Texas Water Development Board analysis of how much groundwater can be produced without “impeding the desired future conditions for aquifers within the district,”
- A Trinity River Authority report on surface water and groundwater interactions in the Trinity River Basin, and
- A study from the Neches & Trinity Valleys Groundwater Conservation District on the impact the applications, or similar applications, will have on aquifers in the district.
Judge Davis also “rescinded and rendered null and void” three actions by the defendants:
- The vote by the board of directors that declared the applications “administratively complete,”
- The subsequent order on the applications to drill water wells, and
- The vote to refer the applications to the State Office of Administrative Hearings.
The plaintiffs are represented by Clayton Bailey and Jared Wilkinson of Bailey Brauer, E. Spencer Nealy and Patrick Lindner or Davidson Troilo Ream & Garza and Stacey Reese, David Deaconson and Will Gray of Pakis, Giotes, Burleson & Deaconson.
Neches & Trinity is represented by John Stover of Skelton Slusher Barnhill Watkins Wells.
The case number is DCCV25-5642-369.
Alexa Shrake contributed to this report.
Texas Business Court, Eleventh Division
Force Majeure Clause ‘Relieved Marathon of Any Obligation’
In a recent opinion from the Eleventh Division of the Texas Business Court, Marathon Oil prevailed against Mercuria Energy America in a dispute stemming from the delivery of natural gas during Winter Storm Uri.
Marathon prevailed on a motion for partial summary judgment earlier this month after the court agreed that the gas delivery contract between the two companies “did not obligate Marathon to acquire replacement gas to satisfy its delivery obligation to Mercuria or buy back its delivery obligation from Mercuria as a prerequisite or alternative to declaring for majeure,” the ruling reads.
A bench trial in the case is currently scheduled to begin Nov. 3. Marathon Oil filed its lawsuit March 4.
According to the opinion, Marathon and Mercuria entered a contract under which Marathon would sell Mercuria natural gas every day in February 2021. When the storm hit, Marathon didn’t deliver the amount of gas promised and declared force majeure. After Mercuria disputed that declaration, this lawsuit followed.
Mercuria argued Marathon was required to either purchase gas on the spot market to meet its obligations or to buy back its delivery obligations.
“The Court holds that the contract did not require Marathon to do either,” the opinion reads. “First, the parties added language to the force-majeure clause — ‘the party claiming excuse shall have no obligation to seek alternative Gas supplies in order to satisfy any obligation hereunder’ — that relieved Marathon of any obligation to seek spot-market gas. Second, the clause’s ‘reasonable efforts’ duty does not encompass buybacks, which would render the clause ineffective.”
The 25-page opinion, issued Oct. 14, was authored by Judge Melissa Andrews, who sits in the Third Division in Austin but was assigned to this case. The Eleventh Division in Houston has so far been the busiest of the business court divisions and has utilized docket equalization to spread the workload.
Marathon is represented by Emily Adler, Sammy Ford IV, Ab Henry, Tim Shelby, Paul Galante and Monica Uddin of Ahmad, Zavitsanos & Mensing and by Mark Trachtenberg, Garrett Martin and Ryan Pitts of Haynes Boone.
Mercuria Energy is represented by David McDowell, Will King and William B. Thomas of McDowell Hetherington.
The case number is 25-BC11A-0013.
Southern District of Texas
Jury Sides with Shell in Uri-Related Electricity Case
Earlier this month, a jury in Houston sided with MP2 Energy, which does business as Shell Energy Solutions, in its dispute with DownUnder GeoSolutions in a lawsuit stemming from an electricity provision agreement.
Shell filed suit in Harris County District Court in May 2024, and DownUnder removed it to federal court in June 2024. Shell alleged that DownUnder was required under a 2019 agreement to provide “electricity or ancillary services” to the Electric Reliability Council of Texas when asked to do so, and Shell was authorized to communicate those instructions and paid DownUnder “a fixed fee for serving as a [load resource] and for remaining available to provide electricity” at ERCOT’s request.
But during Winter Storm Uri in February 2021, ERCOT directed Shell to tell DownUnder to curtail its load. When ERCOT later issued recall instructions, DownUnder “was unable to fulfill its obligation to restore its load,” which forced Shell to buy replacement capacity from the marketplace.
In its first amended complaint, Shell alleged that it suffered more than $2.4 million in damages.
A jury trial before U.S. District Judge David Hittner commenced Oct. 6, and the seven-person panel returned a unanimous verdict in favor of Shell Oct. 16, finding that DownUnder breached the agreement by failing to reimburse Shell for the replacement load resource and that the failure was not excused by a force majeure provision in the agreement.
The jury awarded $270,477.62 in damages. Last week, lawyers for Shell filed a motion asking the court for $1.89 million in attorney fees and costs for prevailing in the case.
Shell Energy Solutions is represented by Michael Mazzone, Dallas Jackson, Morgan A. Haenchen and Natasha Breaux of Haynes Boone.
DownUnder GeoSolutions is represented by Bradford Irelan and Cynthia DeGabrielle of Irelan McDaniel.
The case number is 4:24-cv-02347.
Fifth Court of Appeals, Dallas
Panel Wipes out $26.9M Prejudgment Interest Award
As a three-justice panel recently explained in an opinion that eliminated an award of $26.9 million in prejudgment interest to Highland Capital subsidiary Claymore Holdings, “any amount of interest applied to a zero-dollar judgment is inescapably zero.”
The case involves the refinancing of debt owed by Lake Las Vegas Residential Community and Golf Courses, a 3,592-acre resort community 30 miles from The Strip, and pits Claymore Holdings against Credit Suisse. In December 2014, a jury found Credit Suisse had fraudulently induced Claymore into making a $250 million investment in the project and determined the bank owed $40 million in damages to Claymore.
Claymore had previously reached settlements with three other defendants prior to trial.
The trial court awarded Claymore $211 million in rescission damages from breach-of-contract charges, which the Texas Supreme Court reversed in April 2020, finding those damages were “for essentially the same injury to Claymore that the jury had already valued at $40 million.”
The Supreme Court instructed the trial court to render judgment on the $40 million verdict, minus any settlement amounts.
A different panel of the Fifth Court of Appeals had earlier determined that the application of settlement credits resulted in “a negative damages number resulting in a $0 judgment for Claymore” and remanded the case to the trial court to consider whether to award prejudgment interest under the new damages award calculation.
In a final judgment entered Sept. 20, 2024, the trial court awarded $26.9 million in prejudgment interest.
“The trial court erred in its final judgment. We hold that Claymore is entitled to zero dollars in prejudgment interest because any amount of interest applied to a zero-dollar judgment is inescapably zero,” the panel wrote. “We therefore reverse and render the Sept. 20, 2024 final judgment in favor of Credit Suisse for zero dollars in damages and zero dollars in prejudgment interest.”
Justice Tina Clinton authored the court’s four-page opinion, issued Oct. 21. She was joined by Justices Craig Smith and Mike Lee.
Credit Suisse is represented by Jeff Tillotson of Tillotson Johnson & Patton and Thomas R. Phillips, John Ormiston and Amy Hefley of Baker Botts.
Claymore Holdings is represented by William T. Reid IV, Lisa S. Tsai and Jeremy H. Wells of Reid Collins & Tsai.
The case number is 05-24-01124-CV.
U.S. Supreme Court
3 Former Texas Federal Judges Among 31 Urging Rejection of Trump Tariffs
In an amicus brief filed Oct. 24, a group of 31 former federal judges urged the U.S. Supreme Court to affirm a lower court ruling that the president does not have authority to impose the sweeping tariffs he has levied against other countries.
Former U.S. District Judge for the Western District of Texas Royal Ferguson Jr., former U.S. District Judge for the Eastern District of Texas T. John Ward and former U.S. District Judge for the Western District of Texas Earl Leroy “Lee” Yeakel III all signed the brief.
No other former judges who served within the jurisdiction of the U.S. Court of Appeals for the Fifth Circuit signed.
The brief was filed in two cases: Learning Resources v. Donald J. Trump and Donald J. Trump v. V.O.S. Selections. In Learning Resources, the U.S. District Court for the District of Columbia determined in May that the International Emergency Economic Powers Act “is not a law providing for tariffs” and entered — and later stayed — a preliminary injunction in favor of the plaintiffs.
While in the V.O.S. case, the U.S. Court of Appeals for the Federal Circuit ruled that the International Emergency Economic Powers Act’s reference to the president’s emergency power to “regulate … importation” when there is an “unusual and extraordinary threat” doesn’t authorize the tariff regime implemented by President Trump.
“If, under the ‘major questions’ doctrine or otherwise, this Court should reach the same conclusion, it would not have to reach the issues discussed in this brief,” the former judges wrote. “However, if this Court construes IEEPA as delegating to the President the unlimited power to set tariffs on all goods imported from all our trading partners, we urge the court to find this to be an unconstitutional transfer of legislative power.”
The former judges pointed out that the solicitor general has argued on appeal that the U.S. Supreme Court can’t review a president’s determination that “unusual and extraordinary” circumstances justified the use of emergency powers “because, among other reasons, ‘judges lack the institutional competence to determine when foreign affairs pose an unusual and extraordinary threat that requires an emergency response.’”
“The implications of this argument are profound,” the judges warned. “Over the years, Congress has enacted numerous statutes that give special powers to the President in times of national emergencies. If the President can exercise those powers at any time solely by saying that such an emergency exists, the balance of powers so thoughtfully embedded in our Constitution will become dangerously unstable.”
If the court determines that a president can declare a national emergency exists and that such a decision is immune from judicial review, it would “give the President tyrannical powers,” the brief argues.
The case is set to be argued Nov. 5.
The judges are represented by Elkan Abramowitz of Morvillo Abramowitz Grand Iason & Anello.
The case numbers are 24-1287 and 25-250.
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