I FILED 14-0175
I 2/20/20151:38-11 PM tex-4230467 SUPREME COURT OF TEXAS BLAKE A. HAWTHORNE. CLERK
No. 14-0175
IN THE SUPREME COURT OF TEXAS
r In re Longview Energy Company, Relator Im DC I rtMrtlMC\W pMCDr-.V CrWAtlA MV Dei ATI-ID \ ■
Brief of Amici Curiae I Chamber of Commerce of the United States of America, American Tort Reform Association, and NFIB Small Business Legal Center in Support of Defendants with respf.ct to interpretation of bond cap
El more James Shepherd III SBN 24008025 eshepherd@shb.com Shook. Hardy & Bacon L.L.R JP Morgan Chase Tower 600 Travis Street. Suite 3400 Houston, TX 77002 (713)227-8008 (713) 227-9508 (fax)
Counsel for Amici Curiae
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r i r r i FILED 14-0175 2/20/2015 1:38:11 PM tex-4230467 SUPREME COURT OF TEXAS BLAKE A HAWTHORNE. CLERK
No. 14-0175 r
In re Longview Energy Company, Relator
Brief of Amici Curiae Chamber of Commerce of the United States of America, American Tort Reform Association, and NFIB Small Business Legal Center «. in Support of Defendants with Respect to Interpretation of Bond Cap
Elmore James Shepherd III SBN 24008025 eshepherd@shb.com Shook, Hardy & Bacon L.L.P. JP Morgan Chase Tower 600 Travis Street, Suite 3400 Houston, TX 77002 (713)227-8008 (713) 227-9508 (fax)
r
r TABLE OF CONTENTS ! Page
p TABLE OF AUTHORITIES ii
STATEMENT OF THE CASE vi
f ISSUE PRESENTED vi p INTEREST OF AMICICURIAE 1
SUMMARY OF ARGUMENT 3
[ ARGUMENT 4 r I. APPEAL BOND LIMITS ARE INCREASINGLY i NECESSARY TO SAFEGUARD DUE PROCESS GIVEN THE RISE OF EXTRAORDINARY VERDICTS 4
1 II. TEXAS LED THE STATES IN ADOPTING APPEAL BOND REFORMS IN RESPONSE TO INSTANCES OF MANIFEST r INJUSTICE DUE TO EXCESSIVE BONDS 7 A. The Texaco v. Pennzoil Case Exemplifies the Impossible r Choices Faced by Texas Defendants with Blockbuster Judgments Before the 2003 Appeal Bond Reforms 7
| B. As Instances of Injustice Mounted, Texas Had the Foresight to Enact a Generally Applicable Appeal Bond Limit 9
i C. The Vast Majority of States Now Protect a Defendant's Ability to Appeal 13
t III. THE STATUTE SHOULD BE READ TO PROMOTE THE AVAILABILITY OF MEANINGFUL APPELLATE REVIEW 15
>[ PRAYER 16 f CERTIFICATE OF COMPLIANCE 17 l
CERTIFICATE OF SERVICE 18
GZ&1 TABLE OF AUTHORITIES
[ CASES PAGE [ Engle v. Liggett Group, Inc., 945 So. 2d 1246 (Fla. 2006) 10
p Evitts v. Lucey, 469 U.S. 387 (1985) 4
Honda v. Oberg, 512 U.S. 415 (1994) 4
': In re Nolle Plastics Family Ltd P 'ship, 406 S.W.3d 168 (Tex. 2013) 7, 12
I N. Ind. Pub. Serv. Co. v. Carbon County Coal Co., 799 F.2d 265 (7th Cir. 1986) 6
! O 'Keefe v. The Lowen Group, No. 91 -67-423 (Circ. Ct., Hinds Co., Miss. 1995) 11
I Philip Morris, Inc. v. III. App. Ct., Fifth Dist., No. 96644, 2003 111. LEXIS 2625 (111. Sept. 16, 2003) 10
^ Price v. Philip Morris Inc., 793 N.E.2d 942 (111. App. Ct. 2003) 10 Texaco, Inc. v. Penmoil Co., 626 F. Supp. 250 (S.D.N.Y. 1986), aff'd, 784 F.2d 1133 (2d Cir 1986), rev 'd sub nom., r Penmoil Co. v. Texaco, Inc., 481 U.S. 1 (1987) 7-8
Texaco, Inc. v. Penmoil Co., 729 S.W.2d 768 (Tex. App. 1987) 8 r ' STATUTES. LEGISLATION. AND COURT RULES
j" Ala. Code § 6-12-4 5 r Ark. Code § 16-55-214 13 i Ariz. Rev. Stat. § 12-2108 13 r ! Colo. Rev. Stat. § 13-16-125 13, 14
[" Conn. R. App. P. §61-11 13
Fed. R. Civ. P. 62 6
n RTH Fla. Stat. Ann. § 768.733 9
Ga. Code Ann. § 5-6-46 13, 14
Haw. Rev. Stat. Ann. § 607-26 13
r 111. Sup. Ct. R. 305 10
Ind. Code Ann. § 34-49-5-3 13
Ky. Rev. Stat. § 411.187 14
Me. R. Civ. P. 62 13
Mass. R. Civ. P. 62 13
Mich. Comp. Laws § 600.2607 13
Miss. R. App. R. 8 11
Mo. Rev. Stat. § 512.099 14
Mont. Code Ann. § 25-12-103 14 r Nev. Rev. Stat. § 20.035.1 11
N.C. Gen. Stat. § 1-289 13, 14
N.D. Cent. Code § 28-21-25 13
N.H. Rev. State. Ann. § 527:1 13
Okla. Stat. Ann. tit. 12 §990.4 13, 14
P.R. R. Civ. P. 53.9 13
S.C. Code Ann. § 18-9-130 13, 14
S.D. Sup. Ct. R. 03-13 13
Tenn. Code Ann. § 27-1-124 13, 14
in Tex. Civ. Prac. & Rem. Code § 52.006 passim
1 Tex. R. App. P. 9.4 17
| Tex. R. App. P. 11 1 p Tex. R. App. P. 24.2 7 i Va. Code Ann. § 8.01-676.1 13 r [ Vt. R. Civ. P. 62 13
T W. Va. Code §4-11A-4 11 r W. Va. Code § 58-5-14 14
Wyo. Stat. § 1-17-201 13
I H.B. 4, 78th Leg., R.S. (2003) 11 P OTHER AUTHORITIES
p, Michael Arndt, Texaco Files For Bankruptcy: Oil Giant Buys Time in | $12 Billion Fight, Chic. Trib., Apr. 13, 1987 8
p Nina Bernstein, Funeral Chain Settles, Avoiding a Big Bill, ! N.Y. Times, Jan. 30, 1996, at D5 11 P Elaine Carlson, Mandatory Supersedeas Bond Requirements - A Denial 1 ofDue Process Rights?, 39 Baylor L. Rev. 29 (1987) 7
I Elaine A. Carlson, Reshuffling the Deck: Enforcing and Superseding Civil Judgments on Appeal after House Bill 4, r 46 S. Tex. L. Rev. 1035 (2005) 12 I
Richard L. Cupp, State Medical Reimbursement Lawsuits After Tobacco: P Is the Domino Effect For Lead Paint Manufacturers And Others ! Fair Game?, 27 Pepp. L. Rev. 685 (2000) 9
P Editorial, Too Costly an Appeal, N.Y. Times, Apr. 4, 2003, at A20 10
IV Jef Feeley, Takeda, Lilly Win 99.6% Cut in Actos Punitive Damages, Bloomberg, Oct. 28, 2014, at http://www.bloomberg.com/news/ articles/2014-10-27/takeda-lilly-get-9-billion-actos-award-cut-99- p percent 6 i Hiroyuki Kachi, Takeda, Lilly Ordered to Pay $9 Billion in Diabetes- P Drug Case, Wall St. J., Apr. 8, 2014 6
p Top 100 Verdicts of 2013, Nat'l L.J., Mar. 24, 2014, j at http://www.nationallawjournal.com/id= 1202647966490/ Top-100-Verdicts-of-2013 5 r ! Joseph Nixon, Ten Years of Tort Reform in Texas: A Review (Heritage Found. & Tex. Pub. Pol'y Found. 2013), P ^ http://thfjiiedia.s3.amazonaws.com/2013/pdf/bg2830.pdf 11
The Perryman Group, A Texas Turnaround: The Impact of Lawsuit p Reform on Business Activity in the Lone Star State (2008), at http:// tlrfoundation.com/beta/files/Texas_Tort_Reform_Report_2008.pdf 11-12
[ Doug Rendleman, A Cap on the Defendent's Appeal Bond?: Punitive Damages Tort Reform, 39 Akron L. Rev. 1089 (2006) 8, 11
' Joel Rosenblatt & Laurence Viele Davidson, Exxon Wins $3.5 Billion Appeal in Alabama Fees Case, Bloomberg, Nov. 1, 2007, j at http://www.bloomberg.com/apps/news?pid=newsarchive&sid= afqiYjedTs_o&refer=news 5
I Victor E. Schwartz, Mark A. Behrens & Leah Lorber, Tort Reform Past, Present And Future: Solving Old Problems And Dealing With [" "NewStyle" Litigation, 27 Wm. Mitchell L. Rev. 237 (2000) 4
Sindhu Sundar, Top Product Verdicts of2014—And the Firms That Won I Them, Feb. 9, 2015, at http://www.law360.eom/articles/619796/ top-product-verdicts-of-2014-and-the-firms-that-won-them 6
r STATEMENT OF THE CASE
1 Amici adopt the Statement of the Case of Defendants, The Huff Energy
T Fund, L.P., WRH Energy Partners, L.L.C., William R. "Bill" Huff, Rick r D'Angelo, Riley-Huff Energy Group, LLC, to the extent it relates to the issues
_ p addressed in this amicus brief.
ISSUE PRESENTED
r ' Amici limit their brief to the issue of whether the Court of Appeals correctly
P concluded that Texas law limits the amount of security a defendant must post to
m stay enforcement of a judgment during appeal to $25 million per judgment and
does not authorize quadrupling the amount of security required when there are four
judgment debtors.
p^i
r^
VI INTEREST OF AMICICURIAE
Amici are non-profit trade associations whose members operate in Texas and
1 throughout the United States.1 Amici have an interest in ensuring that Texas law
] adequately safeguards the right of businesses to appeal extraordinary judgments.
p* Amici agree with Defendants' reading of Tex. Civ. Prac. & Rem. Code § 52.006,
adopted by the Court of Appeals, that the maximum appeal bond permitted is r ^ $25 million per judgment, regardless of the number of defendants. Amici do not
I restate these statutory construction arguments, but write to provide the Court with
P the public policy underlying appeal bonds and why interpreting Texas law in a
manner favoring the right to appeal is even more critical today than ever before.
Amici take no position on the merits of the underlying litigation.
r i The Chamber of Commerce of the United States of America
P ("U.S. Chamber") is the world's largest federation of businesses and associations.
« The Chamber represents 300,000 direct members and indirectly represents the
interests of more than three million U.S. businesses and professional organizations
' of every size and in every economic sector and geographic region of the country,
J including Texas. An important function of the Chamber is to represent the
p interests of its members in important matters before the courts, legislatures, and
' No counsel for a party authored this brief in whole or in part, and no counsel or party made a monetary contribution intended to fund the preparation of submission of this brief. No person other than amici, their members, or their counsel made a monetary contribution to its preparation or submission. Tex. R. App. P. 11.
PIT) executive agencies. To that end, the Chamber regularly files amicus curiae briefs
in cases, such as this one, that raise issues of concern to the business community.
Founded in 1986, the American Tort Reform Association ("ATRA") is a
broad-based coalition of businesses, corporations, municipalities, associations, and
professional firms that have pooled their resources to promote reform of the civil
justice system with the goal of ensuring fairness, balance, and predictability in civil
litigation. For over two decades, ATRA has filed amicus curiae briefs in cases
before state and federal courts that have addressed important liability issues.
The NFIB Small Business Legal Center, a nonprofit, public interest law firm
established to protect the rights of America's small-business owners, is the legal
arm of the National Federation of Independent Business ("NFIB"). NFIB is the
nation's oldest and largest organization dedicated to representing the interests of
small-business owners throughout all fifty states. The approximately 350,000
members of NFIB own a wide variety of America's independent businesses from
manufacturing firms to hardware stores. I
FT?)
SUMMARY OF ARGUMENT
Texas's limit on appeal bonds should be interpreted in a manner that
r 1 promotes its purpose: to safeguard the ability of a defendant to appeal an
f" extraordinary adverse judgment. In furtherance of this goal, in 2003, the
p. Legislature limited the security necessary to stay enforcement of a judgment during
an appeal to the lesser of $25 million or 50% of the judgment debtor's net worth.
^ See Tex. Civ. Prac. & Rem. Code § 52.006. Interpreting this limit to apply per j judgment advances the public policy underlying the statutory limit, as the Court of
f* Appeals recognized. The alternative, interpreting the cap to apply per judgment I
debtor, would adversely impair the ability of businesses facing adverse judgments
- particularly in high-stakes "bet-the-business" litigation - to seek appellate
[ review. In multi-defendant suits, as here, the required security to appeal a single
P case could reach or exceed $100 million. Such a result is not only contrary to the
™ statutory text, as Defendants show, but the objective of such laws. Amid
respectfully urge this Court to affirm the Court of Appeals' per judgment
interpretation of Tex. Civ. Prac. & Rem. Code § 52.006.
r ARGUMENT
I. APPEAL BOND LIMITS ARE INCREASINGLY r NECESSARY TO SAFEGUARD DUE PROCESS GIVEN i THE RISE OF EXTRAORDINARY VERDICTS
H Appeal bond limits safeguard due process rights by facilitating meaningful
™, access to a state's appellate court system to challenge an adverse judgment. See
Honda v. Oberg, 512 U.S. 415, 432 (1994) (holding that states must adopt
1 sufficient procedural safeguards to guard against arbitrary deprivation of property
! resulting from punitive damage awards); Evitts v. Lucey, 469 U.S. 387, 393-94
f (1985) (recognizing that the procedures used to decide appeals must make the right i to appeal "meaningful" and "more than a meaningless ritual").
1 The importance of limiting the security required to appeal an adverse
I judgment has significantly increased with the rise of class actions and mass torts,
P the emergence of government-sponsored lawsuits that target corporate defendants
through use of contingency-fee counsel, and the creation of novel and expansive
theories of liability. See Victor E. Schwartz, Mark A. Behrens & Leah Lorber,
! Tort Reform Past, Present and Future: Solving Old Problems and Dealing With
P "New Style" Litigation, 27 Wm. Mitchell L. Rev. 237, 261 (2000). These now-
p entrenched litigation tactics increase the odds of astronomical judgments in civil
cases. Many areas of litigation are increasingly producing eye-popping verdicts of
the type that could present bonding problems for some defendants. For example,
( Exxon Mobil Corp. faced an $11.9 billion judgment for allegedly underpaying
P natural gas royalties from wells in Gulf Coast waters. The punitive damage award,
m which had already been reduced to $3.6 billion, was ultimately thrown out by the
Alabama Supreme Court. See Joel Rosenblatt & Laurence Viele Davidson, Exxon
^ Wins $3.5 Billion Appeal in Alabama Fees Case, Bloomberg, Nov. 1, 2007, at
j http://www.bloomberg.com/apps/news?pid=newsarchive&sid=afqiYjedTs
P _o&refer=news. Exxon was required to post a $4.5 billion appeal bond, see id, as
Alabama limits the amount of a bond only for tobacco defendants. See Ala. Code
§ 6-12-4. Most businesses - particularly small, closely held, family-owned
I businesses - would not have the liquid assets necessary to meet such a requirement.
T Insurers, product manufacturers, and other businesses also face
m extraordinary judgments that necessitate appeal bond limits. According to the
National Law Journal, there were 82 verdicts over $25 million in 2013, including
r 1 19 verdicts at or exceeding SI00 million, and 3 verdicts exceeding $1 billion. See
[" Top 100 Verdicts of 2013, Nat'l L.J., Mar. 24, 2014, at http:// p www.nationallawjournal.com/id=1202647966490/Top-100-Verdicts-of-2013.
These verdicts spanned areas including anti-trust, toxic tort, intellectual property,
product liability, medical malpractice, and nursing home liability. See id. It is no longer difficult to find examples of these types of massive awards.
Last April, a federal jury in Louisiana reached a $9 billion verdict against Takeda
I Pharmaceutical Co. and Eli Lilly & Co. stemming from a lawsuit alleging that the
companies did not adequately disclose the risks of the diabetes medicine, Actos.
rm See Hiroyuki Kachi, Takeda, Lilly Ordered to Pay $9 Billion in Diabetes-Drug
Case, Wall St. J., Apr. 8, 2014.2 Other top product liability verdicts of 2014
included $23.6 billion against a tobacco company, $1.2 billion against paint
manufacturers in a novel public nuisance suit, and $81.1 million against an
automaker in a case alleging a steering defect (after the trial court judge reduced a
$248 million verdict). See Sindhu Sundar, Top Product Verdicts of 2014—And the
Firms That Won Them, Feb. 9, 2015, at http://www.law360.com/articles/619796/
top-product-verdicts-of-2014-and-the-firms-that-won-them.3
Given that verdicts such as these are "the new normal," it is particularly
important that Texas's appeal bond statute is interpreted in a manner that t
The trial court judge reduced the verdict to $36.8 million. Jef Feeley, Takeda, Lilly Win H 99.6% Cut in Actos Punitive Damages, Bloomberg, Oct. 28, 2014, at http:// l ww\v.bloomberg.com/news/articles/2014-10-27/takeda-lilly-get-9-billion-actos-a\vard-cut-99- percent. Had the trial court not significantly reduced the award, the federal rules gave the judge P discretion to set a lower bond. See N. Ind. Pub. Serv. Co. v. Carbon County Coal Co., 799 F.2d l 265, 281 (7th Cir. 1986) (finding Fed. R. Civ. P. 62(d) did not require utility to post $181 million bond). rm
3 While trial courts are likely to use remittitur to reduce many "runaway" verdicts, as several of the cases discussed in this amicus brief show, some judges may allow the verdict to m, stand. In these instances, it is imperative that a company have the ability to pursue an appeal. _ safeguards and preserves the ability of defendants to appeal an extraordinary
judgment.
1 II. TEXAS HAS LED THE STATES IN ADOPTING APPEAL BOND REFORMS IN RESPONSE TO INSTANCES OF MANIFEST INJUSTICE DUE TO EXCESSIVE BONDS
p A. The Texaco v. Pennzoil Case Exemplifies the Impossible { Choices Faced by Texas Defendants with Blockbuster Judgments Before the 2003 Appeal Bond Reforms
i One of the most dramatic examples of the impact of unconstrained appeal
I bond rules occurred here in Texas in the 1980s, after a $10.53 billion verdict— L
p $7.53 billion in actual damages, plus $3 billion in punitive damages and interest —
against Texaco. See generally Elaine Carlson, Mandatory Supersedeas Bond
*■ Requirements - A Denial of Due Process Rights?, 39 Baylor L. Rev. 29 (1987)
I (discussing Pennzoil v. Texaco).
m Texas's Rules of Appellate Procedure at the time required posting a bond
equal to the entire judgment, regardless of amount, plus costs and interest for the
estimated duration of the appeal. See In re Nalle Plastics Family Ltd. P'ship, 406
1 S.W.3d 168, 170 (Tex. 2013) (citing former Tex. R. App. P. 24.2(a)(l)). Texaco P sought and successfully obtained a federal injunction, arguing that Texas's appeal
p* bond requirement effectively prevented it from appealing in violation of the Due
Process Clause of the Fourteenth Amendment. See Texaco, Inc. v. Pennzoil Co.,
I 626 F. Supp. 250, 256 (S.D.N.Y.), aff'd, 784 F.2d 1133 (2d Cir. 1986) (requiring a $1 billion bond). While an appeal of that ruling was pending before the U.S.
Supreme Court, a Texas appellate court upheld the trial court's verdict, but reduced
' the punitive damage award by $2 billion. See Texaco, Inc. v. Pennzoil Co., 729
j S.W.2d 768 (Tex. App. 1987). The U.S. Supreme Court then reversed the federal
(w injunction, finding that the lower courts should not have intervened in a pending [ state proceeding. See Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 10(1987).
1 Six days after the U.S. Supreme Court's decision restoring the full bond
I required by Texas law, Texaco filed for bankruptcy, becoming the largest company
I™ in U.S. history to seek protection under Chapter 11. See Michael Arndt, Texaco
Files For Bankruptcy: Oil Giant Buys Time in $12 Billion Fight, Chic. Trib., Apr.
13, 1987. The bankruptcy filing had the effect of an appeal bond, providing an
r automatic stay on execution of the judgment, and the litigation eventually settled at
a fraction of the verdict. See Doug Rendleman, A Cap on the Defendent's Appeal
Bond?: Punitive Damages Tort Reform, 39 Akron L. Rev. 1089, 1105-06 (2006).
Bankruptcy, however, is an odious alternative to posting a bond. See id. at 1106-
07. It can harm employees, shareholders, and creditors. See Arndt, supra (reporting
that the filing immediately hurt Texaco's ability to conduct day-to-day operations,
such as the ability to obtain credit and the loss of major suppliers, and led the
company to suspend dividends and anticipate a significant drop in its stock price).
8 _, B. As Instances of Injustice Mounted, Texas Had the Foresight [ to Enact a Generally Applicable Appeal Bond Limit
p» Texaco was a preview of a problem that, with an increasing number of
blockbuster verdicts, would soon rise to a national concern. Throughout the
country, appeal bond rules requiring defendants to post security in the full amount pro
[ of a judgment (or more) created unfair roadblocks to the ability to appeal crushing
verdicts.
The problem of oppressive appeal bonding requirements became particularly
evident during the state attorneys general litigation against the tobacco industry pro
L and in the private lawsuits that followed. Commentators at the time suggested that
r the defendants "may have been forced into bankruptcy" because they likely "would
p> have lacked the resources to immediately pay the judgments (or even to post an i appeal bond)." See Richard L. Cupp, State Medical Reimbursement Lawsuits After Ffilt
Tobacco: Is the Domino Effect For Lead Paint Manufacturers and Others Fair
f Game?, 27 Pepp. L. Rev. 685, 689-90 (2000). r Concerns about bankrupting appeal bonds potentially blocking the ability to
appeal moved from the theoretical to the practical in 2000 with a record-setting
$145 billion punitive damage award in a 700,000 member class action against the
I tobacco industry in Florida. In order to allow the defendants the opportunity to
P appeal the unprecedented judgment, the Florida legislature stepped in to reform the
™ state's bonding statute. See Fla. Stat. Ann. § 768.733. The blockbuster award was
r 9 ultimately overturned. See Engle v. Liggett Group, Inc., 945 So. 2d 1246 (Fla.
2006).
The unfairness of appeal bonds came up again in Illinois in 2003 when a
Madison County class action resulted in a $10.1 billion verdict against a tobacco
company alleged to have misled consumers about the health effects of light
cigarettes compared to regular cigarettes. The trial court judge initially set the
appeal bond at $12 billion, and after lengthy hearings, cut the bond in half. An
r appellate court, however, overturned the trial court judge's reduction of the bond.
r See Price v. Philip Morris Inc., 793 N.E.2d 942 (111. App. Ct. 2003). The editorial
page of the New York Times weighed in to protest the unfairness of requiring a
$12 billion bond, likened it to "extortion" to settle, decried the violation of due
I process, and noted requiring such a bond "erodes the credibility of our legal
P system." See Editorial, Too Costly an Appeal, N.Y. Times, Apr. 4, 2003, at A20.
™ The Illinois Supreme Court reinstated the lowered bond. Philip Morris, Inc. v. III.
App. Ct., Fifth Dist., No. 96644, 2003 111. LEXIS 2625 (111. Sept. 16, 2003). It then
' amended its rules to avoid such unfairness in the future by clearly giving trial court
| judge's discretion in setting the amount of the bond. See 111. Sup. Ct. R. 305(a),
p Commentary (2004), at http://www.state.il.us/COURT/SUPREMECOURT/Rules/
Art_III/ArtIII.htm#305 (recognizing that in some circumstances an appeal bond for
the full amount of the judgment, interest, and costs "may be so onerous that it
10 creates an artificial barrier to appeal, forcing a party to settle a case or declare
bankruptcy").
I Due to these types of cases, some of the early states to adopt appeal bond
H caps applied them only to tobacco companies. See, e.g., Nev. Rev. Stat. § 20.035.1
» (enacted 2001); W. Va. Code § 4-11A-4 (enacted 2001). With the troubling
history of the Texaco fiasco hanging over the state's reputation, the Texas
L Legislature had the foresight to enact the appeal bond limit at issue in this case,
[ which applies to all defendants in any type of litigation.4 The legislation limited
r appeal bonds to the lesser of 50% of the judgment debtor's net worth or
$25 million. Tex. Civ. Prac. & Rem. Code § 52.006(b). The Legislature enacted
the appeal bond cap as part of a comprehensive civil justice reform bill that has f-.'.HSI
I created a more business-friendly environment in Texas. See H.B. 4, 78th Leg.,
r R.S. (2003).5
4 Other states also recognized that safeguarding the right to appeal was not a tobacco- specific issue. For example, Loewen Group, a Canadian funeral home and insurance chain, was forced to settle a dispute with a competitor after a Mississippi jury reached a S500 million verdict against it. See Rendleman, 39 Akron L. Rev. at 1128-29 (discussing O'Keefe v. The Lowen Group, No. 91-67-423 (Circ. Ct., Hinds Co., Miss. 1995)). Under Mississippi's rules, the company was required to post a $625 million bond, the approximate net worth of the company. Id. To avoid filing for bankruptcy protection, the company settled the case for S175 million. See Nina Bernstein, Funeral Chain Settles, Avoiding a Big Bill, N.Y. Times, Jan. 30, 1996, at D5. Soon thereafter, Mississippi limited appeal bonds, but it was too late to help Loewen. See Miss. R. App. R. 8 (amended in 2001 to limit appeal bonds to the lesser of 125% of the judgment, 10% of the net worth of the defendant, or SI 00 million).
5 For articles documenting the success of Texas's 2003 reform package, see generally Joseph Nixon, Ten Years of Tort Reform in Texas: A Review (Heritage Found. & Tex. Pub. Pol'y Found. 2013), at http://thfmedia.s3.amazonaws.com/2013/pdf/bg2830.pdf; The Perryman
11 Unlike the prior appellate rule, the Texas statute does not require a debtor to
secure any punitive damages portion of the award. Id. § 52.006(a)(l). The 2003
law also reduced the evidentiary burden required for a debtor to seek a lower bond
due to the substantial economic harm it would cause. Id. § 52.006(c). As this
Court recognized, the Legislature's enactment of Section 52.006 '"reflect[ed] a
new balance between the judgment creditor's right in the judgment and the
dissipation of the judgment debtor's assets during the appeal against the judgment
debtor's right to meaningful and easier access to appellate review.'" Nalle, 406
S.W.3d at 170 (quoting Elaine A. Carlson, Reshuffling the Deck: Enforcing and
Superseding Civil Judgments on Appeal after House Bill 4, 46 S. Tex. L. Rev.
1035, 1038 (2005)). In 2013, consistent with the purpose of the statute, this Court
held that a prevailing party's attorney's fees and costs are typically not
"compensatory damages" included in a judgment debtor's bond. See id. The
Court should again interpret the statute to promote appellate rights.
Group, A Texas Turnaround: The Impact of Lawsuit Reform on Business Activity in the Lone Star State (2008), at http://tlrfoundation.com/beta/files/Texas_Tort_Reform_Report_2008.pdf.
12 C. The Vast Majority of States Now Protect a | Defendant's Ability to Appeal
p Recognizing the problem of unconstrained appeal bonds, approximately t t
thirty jurisdictions have passed legislation or amended court rules to limit the size
' of the bond requirements in any civil case involving a large judgment.6 Like
| Texas, these states acted to safeguard a defendant's right to appeal. The Court
P should interpret Texas's appeal bond statute to promote this sound policy.
Texas's appeal bond statute is in the mainstream. Many states have adopted
similar $25 million limits. See, e.g., Ark. Code § 16-55-214; Ariz. Rev. Stat. § 12-
I 2108; Colo. Rev. Stat. § 13-16-125; Ga. Code Ann. § 5-6-46; Haw. Rev. Stat. Ann.
P § 607-26; Ind. Code Ann. § 34-49-5-3; Mich. Comp. Laws § 600.2607(1); N.C.
r Gen. Stat. § 1-289; N.D. Cent. Code § 28-21-25; Okla. Stat. Ann. tit. 12
§ 990.4(B)(5); S.C. Code Ann. § 18-9-130(A)(l); S.D. Sup. Ct. R. 03-13; Tenn.
I Code Ann. § 27-1-124; Va. Code Ann. § 8.01-676.1; Wyo. Stat. § 1-17-201. In recent years, states continue to follow Texas's lead. For example,
p» Arizona similarly limited appeal bonds to the lesser of $25 million or 50% of the
appellant's net worth. Ariz. Rev. Stat. § 12-2108 (enacted 2011). South Carolina
[ limited the amount of an appeal bond to $25 million for all judgments against
6 Approximately ten additional states have enacted appeal bond limits specific to tobacco litigation. Six jurisdictions do not require defendants to post a bond at all during an appeal. See Conn. R. App. P. § 61-11; Me. R. Civ. P. 62; Mass. R. Civ. P. 62(d); N.H. Rev. State. Ann. § 527:1; Vt. R. Civ. P. 62(d)(l); P.R. R. Civ. P. 53.9.
13 defendants with fifty or more employees and gross revenue of $5 million, and
$1 million for all judgments against all other defendants. S.C. Code Ann. § 18-9-
I 130(A)(l) (enacted 2011). Tennessee lowered the amount a defendant can be
P required to pay to appeal a decision from $75 million to $25 million, not to exceed
p, 125% of the judgment. Tenn. Code Ann. § 27-1-124 (enacted 2011). North
Carolina maintained its $25 million limit set in 2003, but required its courts to hold
*■ a hearing to determine a fair amount of the bond. N.C. Gen. Stat. § 1-289
! (amended 2011). Oklahoma, similar to Texas, amended its $25 million limit to
p eliminate the need to bond any portion of the award for punitive damages. Okla.
Stat. Ann. tit. 12 § 990.4(1) (enacted 2009); see also Mont. Code Ann. § 25-12-103 pro
(enacted 2013) (limiting appeal bonds to $50 million).
I Many state bond caps do not explicitly address the maximum amount of the
[" bond when there are multiple defendants. Those statutes in which the legislature
_, thought to expressly address the issue recognize that the cap should apply
collectively to all appellants. See Colo. Rev. Stat. § 13-16-125(1); Ga. Code Ann.
I § 5-6-46(b); Ky. Rev. Stat. § 411.187(1); Mo. Rev. Stat. § 512.099( 1); see also W. I Va. Code Ann. § 58-5-14(b) (treating multiple judgments resulting from cases
p* consolidated or aggregated for trial as a single judgment). Texas's appeal bond
limit should be applied in this manner. The alternative is a return to massive j i
rrrn)
14 appeal bond requirements in complex cases, high-stakes cases involving multiple
defendants, where the risk of an error is particularly high.
1 III. THE STATUTE SHOULD BE READ TO PROMOTE THE AVAILABILITY OF MEANINGFUL APPELLATE REVIEW
L Without fair limits on appeal bonds, there is often only one way for a
I defendant to avoid bankruptcy after an extraordinary verdict: the defendant must
r settle, even if the judgment resulted from egregious errors, and it must do so at a
"premium" rate, because the plaintiff knows the defendant has no alternative.
Following Texas's lead, states have increasingly protected the right to appeal by
[ expanding the applicability of appeal bond limits from tobacco to all litigation,
T excluding the punitive damage portion of awards from bonding requirements, and
p, reducing the maximum amount of the bond. It would be both odd and unfortunate
for Texas to backpedal now by adopting an interpretation of its appeal bond limit
l that impairs the right to meaningful appellate review. Texas's appeal bond limit
should be read in the context of its pre-2003 experience with excessive appeal
f1 bonds, with the legislative intent as recognized by this Court, and in a manner that
safeguards the right to appeal in an environment of increasingly novel legal
1 theories and breathtaking verdicts.
15 r PRAYER
For the foregoing reasons, Amici respectfully request that this Court affirm
the ruling of the Court of Appeals, Fourth District, finding that the supersedeas
bond contained in Tex. Civ. Prac. & Rem. Code § 52.006 applies per judgment, not
per judgment debtor.
Respectfully submitted,
/s/ Elmore James Shepherd III Elmore James Shepherd III SBN 24008025 eshepherd@shb.com Shook, Hardy & Bacon L.L.P. JP Morgan Chase Tower 600 Travis Street, Suite 3400 Houston, TX 77002 (713)227-8008 (713) 227-9508 (fax)
Dated: February 20, 2015 CERTIFICATE OF COMPLIANCE
I hereby certify that: (1) the word count of this document is 3,599 words
according to Microsoft Word 2010 and excluding those parts of the document
H specified in Tex. R. App. P. 9.4(i)(l); and (2) this document was prepared in a
conventional typeface no smaller than 14-point for text and 12-point for footnotes,
with the exception of the counsel listing on the cover.
/s/ Elmore James Shepherd HI Elmore James Shepherd III
p!?I CERTIFICATE OF SERVICE
I certify that on February 20, 2015, a copy of the foregoing Brief was served
upon the following by first class U.S. mail, postage prepaid, addressed as follows:
Craig B. Florence Daryl L. Moore Randy D. Gordon Daryl L. Moore, P.C. Stacey R. Obenhaus 1005 Heights Boulevard Rachel Kingrey Houston, TX 77008 Gardere Wynne Sewell LLP Attorneyfor 1601 Elm Street, Suite 3000 The Huff Energy Fund, L.P. Dallas, Texas 75201-4761 and Thomas R. Phillips Mikal C. Watts Matt C. Wood Francisco Guerra IV Baker Botts L.L.P. Watts Guerra, LLP 98 San Jacinto Blvd. Four Dominion Drive Suite 1500 Bldg. 3, Suite 100 Austin, TX 78701 San Antonio, Texas 78257 and Attorneys for Dean V. Fleming Longview Energy Company Michael W. O'Donnell Jeffrey A. Webb Pamela Stanton Baron FULBRIGHT & JAWORSKI, L.L.P. Post Office Box 5573 300 Convent St., Ste. 2100 Austin, Texas 78763 San Antonio, TX 78205 Attorneyfor Rick D 'Angelo Attorneys for Riley-HuffEnergy Group, LLC
Sharon E. Callaway The Honorable Amado Abascal Crofts & Callaway, P.C. Judge, 365th Judicial District Court 613 N.W. Loop 410, Suite 800 501 Main Street San Antonio, Texas 78216-5509 Eagle Pass, Texas 78852 and and Ricardo R. Reyna Fourth Court of Appeals Brock Person Guerra Reyna, P.C. Cadena-Reeves Justice Center 17339 Redland Road 300 Dolorosa, Suite 3200 San Antonio, Texas 78247 San Antonio, Texas 78205-3037 Attorneys for Respondents WilliamR. "Bill" Huff /s/Elmore James Shepherd III
18 Shook, Harch LULRi
www.shb.com February 20, 2015
James Shepherd
■ : JPMorgan Chase Tower BY US MAIL 600 Travis Street. Suite 3400 Houston. Texas The Honorable Amado Abascal 77002-2926
Judge, 365th Judicial District Court 713.227.6008
501 Main Street 713.546.5610 DD 713.227.9508 Fax Eagle Pass, Texas 78852 ESHEPHERD@SHB.COM
Re: No. 14-0175; In the Supreme Court of Texas In Re: Longview Energy Company. Relator
Dear Honorable Amado Abascal:
Enclosed please tlnd the Brief of Amici Curiac Chamber of Commerce of the United States of America, ct. al, that was electronically filed with the Supreme Court of Texas today.
Sincerely,
—^ * no ^ - ' —
CO James Shepherd - <\ ■ *T 1 ' :i Partner
EJS:mlg Enclosure
cc: Craig B. Florence Thomas R. Phillips Randy D. Gordon Man C. Wood Stacey R. Obcnhaus Dean V. Fleming Mikal C. Watts Michael W. O'Donnell Francisco Guerra IV Jeffrey A. Webb
Attorneysfor Longview Energy Attorneys for Riley-Huff Energy Group, t LC Company Denver
Geneva
Houston Sharon E. Callaway Pamela Stanton Baron Kansas City Ricardo R. Reyna Attorney for Rick D 'Angela London
Attorneys for William R. "BUI" Huff Miami
Orange County Philadelphia Daryl L. Moore Fourth Court of Appeals San Francisco
Attorney for 'The Huff Energy Fund, L.P. Seattle Tampa
Washington. D.C.
607906vi CLASS MAIL 55 ii~«
Shook, Hardygr www.shb.com JPMorgMCIiiieTowa 600 Travis Sliw«. Suite MOO lloulton. Tons 77002-2926 >64040
FOURTH COURT OF APPEALS CADENA-REEVES JUSTICE CENTER 300 DOLOROSA SUITE 3200 SAN ANTONIO TEXAS 78205-3037
First Class Mail