in Re Texas Genco, LP, N/K/A Texas Genco II, LP

• Court: Court of Appeals of Texas
• Decided: August 10, 2005
• Docket: 10-05-00239-CV
• Status: Published

Opinion

IN THE

TENTH COURT OF APPEALS

 

No. 10-05-00239-CV

In re Texas Genco, LP, n/k/a Texas Genco II, LP

Original Proceeding

DISSENTING Opinion

          The action of the court is void because Chief Justice Gray is disqualified.  Even if it is not void, the trial judge did not abuse his discretion when he denied the motion to quash the deposition of Jack Fusco, CEO of the Relator, which is the party that filed the underlying suit.  Accordingly, I dissent.

          Chief Justice Gray filed a “Certification of Disqualification” in Cause No. 10-05-00244-CV, another mandamus proceeding in which CenterPoint Energy, Inc. was the Relator.  See In re CenterPoint Energy, Inc., No. 10-05-00244-CV (Tex. App.—Waco June 6, 2005, certification).  The issue in that case arose in the same underlying case, when the Real Party in Interest filed a notice to take the deposition of CenterPoint’s CEO David McClanahan.  We conditionally issued a writ of mandamus.[1]  See In re CenterPoint Energy, Inc. 2005 WL 1531827 at *9-10 (Tex.  App.—Waco June 29, 2005, orig. proceeding).

          The Petition for Writ of Mandamus in this case explains: “At the time this lawsuit was filed, Texas Genco, LP was an indirect, wholly-owned subsidiary of CenterPoint Energy, Inc. . . . In December 2004, Texas Genco, LLC—through its wholly-owned subsidiary Texas Genco II, LP—acquired all of Texas Genco’s non-nuclear power generation assets, including the Limestone Plant, from CenterPoint. . . .  Accordingly, Texas Genco II, LP is Texas Genco, LP’s successor.”  The reporter’s record filed in this proceeding shows that the separate motions to quash, filed by CenterPoint and Relator, were heard, and denied, in the same hearing.

          For reasons not entirely clear, Chief Justice Gray communicated directly to the parties on June 29, 2005, by letter signed only by him, that (1) his wife is represented by Susman Godfrey, counsel for Valence Operating Company, the Real Party in Interest, (2) his wife owns stock in CenterPoint Energy, Inc., and (3) although she formerly owned stock in Texas Genco, the Relator, it was sold in a forced sale in the Fall of 2004.  He expressed the opinion that he is not disqualified or subject to recusal but set a deadline of July 20 for filing such a motion.[2]  That letter was neither approved by nor joined by any other justice.

          After counsel for Texas Genco responded, Chief Justice Gray again communicated directly to the parties on July 6, by a letter signed only by him, raising “two issues regarding Center Point’s involvement” and asking these questions:

• Has CenterPoint been, or is it likely to be, a party to the underlying litigation?
• Is there any way that CenterPoint is or could be impacted financially as a result of the underlying litigation?
• Is Centerpoint now simply a person from whom discovery is sought that is no longer a party to the underlying litigation?
• Whether the prior involvement of CenterPoint as a party in this litigation, and the prior ownership interest in Genco, is a ground for constitutional disqualification or for recusal?
• What is the nature of the discovery sought from CenterPoint? 
• If the discovery could be material to the result, is it different than if the discovery provided by CenterPoint is largely uncontested or otherwise immaterial?

The letter asks for briefing on the first four questions.[3]  As with the first letter, neither of the other justices on the panel in this case approved the letter nor joined in sending it.

          Why is this important?  Because disqualification[4] on constitutional grounds cannot be waived and may be raised even after the judgment is beyond appeal.  Fry v. Tucker, 146 Tex. 18, 202 S.W.2d 218, 221-22 (1947).  An order or judgment rendered by a constitutionally disqualified judge is void.  See In re Union Pac. Resources Co., 969 S.W.2d 427, 428 (Tex. 1998) (orig. proceeding).  A disqualification is a disqualification; it does not depend on “likelihood,” “could be,” “materiality,” or whether a matter is “uncontested.”

          Recusal is another matter.  Grounds for recusal of an appellate judge are essentially the same as those provided in the Rules of Civil Procedure.  Id.; Tex. R. App. P. 16.2; Tex. R. Civ. P. 18b(2).  Grounds for recusal can be waived after fully disclosed on the record.  Tex. R. Civ. P. 18b(5).  Here, the question would be full disclosure.  If it was necessary to send the letters described above, in my view more information should have been provided, including for example:

·        the name of counsel at Susman Godfrey who is handling the injury claim;

·        if a case is pending, how long has it been pending and the status of the case;

·        whether claims are included that belong to the community estate;

·        additional information about the financial interests in the party-companies, including whether, as addressed in rule of procedure 18b(4)(d), a relationship such as director or advisor or other active participation in the affairs of either company exists; and

·        an offer to provide any information that a party might reasonably request to evaluate the merits of a possible motion to disqualify or recuse.

Full disclosure would include information about a spouse’s holdings and relationships.  See Tex. R. Civ. P. 18b(3) (“A judge should inform himself about his personal and fiduciary financial interests, and make a reasonable effort to inform himself about the personal financial interests of his spouse . . . .”).  The information presented was not sufficient to evaluate the need for a recusal motion.

Texas Genco’s counsel responded to Chief Justice Gray’s request, acknowledging that CenterPoint was the parent of Texas Genco, that a direct pecuniary or personal interest in the results of a case disqualifies a judge, that being a stockholder in a corporation disqualifies judge when the corporation is a party, that Chief Justice Gray’s wife still owns CenterPoint stock,[5] that the Real Party in Interest has served discovery on CenterPoint that “will no doubt be burdensome for CenterPoint Energy and will cause it to incur attorney’s fees and other expenses.”  The response asserts that no Texas authority has been identified where third party discovery rises to the level of a direct and substantial financial interest but acknowledges that the rules provide for recusal of a judge who knows that his spouse has a financial interest in a party to the proceeding or any other interest that could be substantially affected by the outcome of the proceeding.

Notwithstanding Chief Justice Gray’s direct request for briefing with a July 20 deadline, Valence Operating Company, the Real Party in Interest, replied on July 28 without briefing, essentially adopting Texas Genco’s position.[6]  Susman Godfrey has not responded.

Believing that the order is void because CenterPoint is a party to the proceeding below and that the ruling on the merits is wrong, I dissent.

BILL VANCE

Justice

Dissenting opinion delivered and filed August 10, 2005

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    [1]       We also have a direct appeal pending involving these parties, Texas Genco, LP v. Valence Operating Co., No. 10-04-00365-CV.

    [2]       Even if it were necessary to communicate directly with the parties, no opinion should be expressed on a matter not then pending before the court.  Stating in advance that no grounds for disqualification or recusal exist is bound to have a “chilling effect” on the parties.

    [3]       This is the first time in my almost fifteen years on the court that a single justice has requested briefing on a matter that pertained only to that justice.

    [4]       An appellate judge, unlike a trial judge, may be disqualified only on constitutional or statutory grounds, not on the basis of the rules of procedure.  New Products, Inc. v. Strong Industries, Inc., 129 S.W.3d 594, 598 (Tex. App.—Houston [1st Dist.] 2003, no pet.).

    [5]       The presumption is that the stock is community property.

    6       In the direct appeal, Valence advised the Clerk that it was “aware of” no grounds for disqualification or recusal.