Southeast Texas Record

Thursday, February 20, 2020

Texas appeals court undermined state Supreme Court precedent in recent decision, dissenting justice says

By Karen Kidd | Jan 15, 2020

Texas Fourteenth Court of Appeals Chief Justice Kem Thompson Frost |

AUSTIN (SE Texas Record) — A Texas appeals court split appeals court decision undermined Texas Supreme Court precedent when it modified a lower court ruling, a dissenting justice in the case said.

The 67-page Texas Fourteenth Court of Appeals majority opinion undermined the January 2015 Texas Supreme Court decision in National Property Holdings L.P. v. Westergren, appeals court Chief Justice Kem Thompson wrote in her dissent from the majority opinion issued Dec. 17.

Westergren decided, among other things, that provisions in an agreement could provide more or less protections, according to Thompson's dissent.

"Because the provisions perform discrete functions and protect in different ways, the law does not view them as interchangeable," Thompson said in her dissent. "Nor should this court. Yet, the majority essentially finds that the two separate clauses in section 26 operate as a waiver and nothing more."

The appeals court's two-judge majority on the three-judge panel found, among other things,   that a covenant not to sue is not part of an agreement between a construction company, the company's mechanical group and a chemical company. Instead, that part of the agreement "is only a waiver of certain damages," the appeals court's majority opinion said.

"Therefore, it cannot support a judgment for breach of contract," the majority opinion continued.

For that reason, the appeals court majority deleted a portion of a lower court's award to a construction company on its counter claim, rendering it a take-nothing judgment in the chemical company's favor.

Appeals court Justice Kevin Jewell wrote the majority opinion in which Justice Frances Bourliot concurred.

The appeals court handed down the split decision in the dispute between James Construction Group, Primoris Services Corporation and Westlake Chemical Corporation, according to the background portion of the majority appeals court decision. The dispute arose over safety issues that prompted Westlake to remove James Construction's mechanical group from a more than half billion dollar construction project.

A Harris County district court jury awarded more than $1.1 million in breach-of-contract damages against James and Primoris and more than $2.9 million in attorney's fees against Primoris only. In the same judgment, James Construction was awarded more than $1.2 million in breach-of-contract damages against Westlake on James Construction's counterclaim.

Each party raised multiple issues on appeal.

In her 11-page dissent from the two-judge majority, appeals court Chief Justice Kem Thompson Frost said she disagreed with the majority's analysis of Westlake Chemical's cross-issue about the Harris County District Court's decision to render judgment in favor of James Construction.

In that cross claim, the other two appeals court judges held that Westlake Chemical's agreement to make no claim for consequential damage amounted to a promise to not assert any claim for consequential damages.

Thompson disagreed.

"This court should not sustain the first cross-issue on this basis because, under the agreement’s plain language, Westlake Chemical promised not to assert any claim against James for consequential damages and despite this agreement, Westlake Chemical did so," Thompson said in her dissent.

The no-claims provision and the limitation-of-liability provision in the agreement, added protections that James Construction and Westlake Chemical bargained for, differ "in content and purpose," Thompson said in her dissent.

"The words in the no-claims provision create a distinct and independent contractual duty to make no claims for consequential damages," Thompson continued in her dissent. "The majority could and should give the no-claims provision meaning, yet it fails to do so."

By not recognizing the covenant in the agreement's no-claims provision, Justice Jewell and Justice Bourliot undermines Texas Supreme Court precedent, according to Thompson's dissent.

"Rather than overrule Westlake Chemical's first cross-issue based on the majority's interpretation of the no-claims provision, the court should hold that under section 26's unambiguous language, Westlake Chemical promised not to assert any consequential-damages claims against James," Thompson said in her dissent.

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Harris County District CourtSUPREME COURT OF TEXAS