MEMBER UPDATE
March 4, 2010
TEXAS CEC TO SUBMIT AMICUS BRIEF TO SUPREME COURT
REGARDING ECONOMIC LOSS RULE
TEXAS CEC is preparing an amicus brief to submit to the Texas Supreme Court in a case involving litigation against two member firms. If wrongly decided, the case could increase liability of firms to entities that firms have no contract and that suffer no physical damages.
In this particular case, the Sharyland Water Supply Corporation sued the City of Alton, Cris Equipment Company, Inc., Carter & Burgess, Inc., and Turner Collie & Braden, Inc. alleging that parts of Alton’s sanitary sewer system injured Sharyland’s water main, even though the firms had no contract with Sharyland and Sharyland suffered no physical damages. A jury found that Cris, C&B, and TCB breached a contract of which Sharyland was a third-party beneficiary and that all three were negligent. The jury awarded approximately $1.1 million damages and $500,000 attorney’s fees against all defendants. The defendants appealed.
The appeals court reversed the lower court decision and ruled that Sharyland should receive nothing for damages and no attorney’s fees on its contract claims and its negligence claims. The contract claim was reversed because the court found that there was no explicit third-party benefit language in the contracts. The negligence ruling was reversed because the court found that the economic loss rule barred recovery. Citing precedent, the Court said that because there was no privity of contract (or third-party beneficiary status), economic damages were not recoverable unless they were accompanied by actual physical injury or property damage, of which the court found there were none.
Sharyland appealed to the Texas Supreme Court and the Court has granted cert. Oral arguments are scheduled for March 24th.
The potential negative impact of a reversal by the Supreme Court regarding the economic loss rule is significant. Currently as it stands, parties seeking economic (not physical or property) damages who do not have a contract nor have third-party beneficiary status will be barred from recovery by the economic loss rule. A reversal of this precedent would open companies up to negligence claims for economic damages to parties that have no contract with the company or third-party beneficiary status whatsoever. Arguably then, companies would have a duty to a number of potential unknown, unforeseeable claimants that have not incurred any physical or property damage.
TEXAS PRIMARY ELECTIONS
Texas party primary elections were held Tuesday. Governor Rick Perry and former Houston Mayor Bill White, of course, won their respective gubernatorial primaries. The Governor's final margin over Sen. Hutchison was 51-30 percent. He received 750,000 of 1.5 million votes cast in the Republican primary while White received 515,000 (76%) of 677,000 votes cast in the Democratic primary.
In the Senate incumbents Steve Ogden and Bob Deuell won renomination. In the Waco area, the incumbent Kip Averitt was reelected even though he has stated that he would withdraw. He is expected to do so shortly, in which case the county party chairmen from the counties in the district would collectively name new candidates for the November elections. Speculation about potential nominees includes former Sen. David Sibley, Rep. Jim Pitts for Waxahachie (currently chairman of the House Appropriations Committee), and others. Sen. Averitt has been chairman of the Senate Natural Resources Committee for several sessions and is a legislative leader on water issues. His departure will leave a void in that policy area.
Perhaps the most significant House race was Southlake Rep. Vicki Truitt winning outright a race against three challengers, all of whom were critical of her support for allowing a vote on local option transportation user fees. This is a significant setback for the anti-taxers, who went after Rep. Truitt with a vengeance. It suggests that there is significant support in at least this part of the metroplex for transportation solutions. Arch-conservative groups also went after Euless Rep. Todd Smith over his management of voter ID legislation, but Rep. Smith won with 59% of the vote. All in all, Tea Party groups made a lackluster showing, although Debra Medina drew 20% of the Republican gubernatorial votes.
Several House incumbents lost in the primary - Rep. Tommy Merritt (R-Longview), Rep. Betty Brown (R-Terrell), Rep. Dora Olivo (D-Rosenberg), Rep. Tara Rios-Ybarra (D-Padre Island), Rep. Al Edwards (D-Houston), and Rep. Terri Hodge (D-Dallas). Other than Rep. Merritt's membership on the House Transportation Committee, none of these members have been active on infrastructure and engineering issues.
Several other incumbents are in runoffs - Rep. Fred Brown in College Station, Rep. Delwin Jones in Lubbock, and Rep. Norma Chavez (who trailed a challenger) in El Paso.
Local races of significance included County Judge Keith Self winning renomination in Collin County. Judge Self has been an active opponent of QBS selection of professional services and is expected to continue advocacy on that point.
Finally, significant speculation continues about whether Sen. Hutchison will resign her Senate seat or serve out the remaining two years of her term. She initially said she would resign last year, then that she would resign after the gubernatorial primary. However, a number of voices are suggesting that she serve out her term and it is widely expected that she will. The significance of this is decision is that, should she resign, a special election for the U.S. Senate seat would be held that could include Lt. Governor Dewhurst, Roger Williams, Sen. Florence Shapiro, and likely many others. If she does not resign, the Senate seat will be contested during the normal election cycle in 2012.
OTHER
- The TEXAS CEC Annual Meeting will be held April 8-9 at the Hyatt Lost Pines Resort just east of Austin.
- Texas House of Representatives Speaker Joe Straus has created a Special House Committee on Transportation Funding. The panel is divided into two subcommittees, one on funding and one on accountability issues. The overall committee will be chaired by Rep. Larry Phillips (R-Sherman). The subcommittee on funding will be chaired by Rep. Drew Darby (R-San Angelo) and the subcommittee on accountability will be chaired by Rep. Ryan Guillen (D-Rio Grande City).
- TEXAS CEC and the Texas Department of Rural Affairs held a meeting in February to discuss mutual issues, including Hurricane Rita and disaster recovery programs administered by the agency. One area of concern raised by CEC is the role of grant administrators and whether engineering firms can more efficiently and cost-effectively provide more administrative services.
IN THE NEWS
Go to Infrastructure News at www.cectexas.org/infrastructure for newspaper articles from around the state and country on transportation, environment, construction, public works and other areas including:
- The Fed reports that Texas may have lost 50,000 more jobs in 2009 than the data previously indicated.
- DMN Transportation Blog: Why Didn't the Local Option Sink Vicki Truitt?
- A California Legislative Analyst says CALTRANS has a bloated workforce and should shed 1,500 jobs.
- Dallas county commissioners clash over the creation of a county toll road authority.
- Study says that drainage and flooding problems in west Houston are a "big mess."
- Reports show modest but steady economic recovery.
- The EPA says the Supreme Court rulings on the scope of the law hurt Clean Water Act enforcement.
- The North Texas Tollway Authority voted to accept the SH 161 project with backing from TxDOT.
- The Austin City Council heard a proposal for expanded urban rail.
- Fort Worth Mayor Mike Moncrief in his state of the city address said that FW faces a transportation crisis.
- Corpus Christi South Loop could move forward with a private partner.
- An influential group of engineers is seeking support for flood protection efforts in Houston.
- and much more . . . .
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