The Small Business Administration (“SBA”) issued an update to its “Frequently Asked Questions for Lenders and Borrowers for the Paycheck Protection Program,” adding question #46 and the response, which is recited below.  For PPP loans of less than $2 million, the borrower will be “deemed to have made the required certification concerning the necessity of the loan request in good faith.”  PPP loans greater than $2 million will be subject to SBA review for compliance. If the SBA concludes that “a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request,” it will seek repayment. Importantly, if the loan is repaid in response to such notification, the SBA will not pursue administrative enforcement or referrals to other agencies in regard to the loan necessity certification.

  1. Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?

Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates,20 received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.

Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.

By: Jimmy Dupuis

In response to the COVID-19 disaster, Texas Governor Greg Abbott issued two orders allowing parties to notarize certain documents without a physical appearance before a notary public.  The orders suspend multiple statutes that require a face-to-face meeting, and they set out procedures that must be followed using video conference technology.

Estate Planning Documents

The first order was issued on April 8, 2020 and will remain in effect until terminated by the Office of the Governor or until the March 13, 2020 disaster declaration is lifted or expires.  It provides that parties may use video conference technology to notarize certain estate planning documents, including:

  • self- proving affidavits for wills;
  • durable powers of attorney;
  • medical powers of attorney;
  • directives to physicians; and
  • oaths of executors, administrators, and guardians.

The order suspends the following statutes to the extent necessary to allow for appearance before a notary public via video conference:

  • Estates Code § 251.104(b)
  • Estates Code § 251.1045(a)
  • Estates Code § 751.0021(a)(4)
  • Health & Safety Code § 166.154(b)
  • Health & Safety Code § 166.032(b-1)
  • Estates Code § 305.054
  • Estates Code § 1105.052

According to the order, documents executed while the order is in effect will be valid, including after the termination of the order, if the following procedures are employed:

  • A notary public shall verify the identity of a person signing a document at the time the signature is taken by using two-way video and audio conference technology.
  • A notary public may verify identity by personal knowledge of the signing person, or by analysis based on the signing person’s remote presentation of a government-issued identification credential, including a passport or driver’s license, that contains the signature and a photograph of the person.
  • The signing person shall transmit by fax or electronic means a legible copy of the signed document to the notary public, who may notarize the transmitted copy and then transmit the notarized copy back to the signing person by fax or electronic means, at which point the notarization is valid.

Note that this order does not address statutory requirements requiring wills to be witnessed by two people in the “conscious presence” of the testator.

Even though the order states that documents executed in compliance with the foregoing shall remain valid after the termination of the suspension of the applicable statutes, you should consult with your attorney about the advisability of re-executing any documents signed utilizing the procedures outlined above.

Real Estate Documents

This order was issued on April 27, 2020 and will remain in effect until the earlier of May 30, 2020 or the termination of the March 13, 2020 disaster declaration.  It suspends section 121.006(c)(1) of the Texas Civil Practice & Remedies Code to the extent necessary to allow for appearance before a notary public for the purpose of acknowledging real-estate instruments via video conference.

According to the order, documents executed while the order is in effect will be valid if the following procedures are followed:

  • A notary public shall use two-way audio-video communication technology that allows for direct and contemporaneous interaction between a person signing a document and the notary public by sight and sound.
  • A notary public shall verify the identity of a signatory at the time the signature is taken by using two-way audio-video communication technology. A notary public may verify identity by:
    • personal knowledge of the signatory;
    • analysis based on the signatory’s remote presentation of a government-issued identification credential, including a passport or driver’s license, that contains the signature and a photograph of the signatory, and is of sufficient quality to allow for identification; or
    • an introduction of the signatory by oath of a credible witness who personally knows the signatory, and who is personally known to the notary public.
  • During the two-way audio-video communication:
    • the notary public shall attest to being physically located in Texas;
    • the signatory shall attest to being physically located in Texas;
    • the signatory shall affirmatively state what documents are being signed; and
    • the signatory’s act of signing shall be close enough to the camera for the notary public to observe it clearly.
  • A recording of the two-way audio-video communication of the notarial act shall be kept by the notary public for two years from the date of the notarial act.
  • The signatory shall send the original signed documents by courier, U.S. Mail, or overnight carrier directly to the notary public for the notary public to sign and to affix the official stamp or seal.
  • The official date and time of the notarization shall be the date and time when the notary public witnessed the signatory signing the documents during the two-way audio-video communication.
  • The documents shall include, whether in a notarial certificate, a jurat, or an acknowledgement, language substantially similar to the following: “This notarization involved the use of two-way audio-video communication pursuant to the suspension granted by the Office of the Governor on April 27, 2020, under section 418.016 of the Texas Government Code.”

Note that this order states that it does not prevent a traditional notarization or an online notarization under chapter 406 of the Texas Government Code.  Although the first order, applicable to estate planning documents, does not contain similar language, the same would presumably apply.

By: Jennifer Jones Thomas

The Centers for Medicare and Medicaid Services (“CMS”) has issued additional blanket waivers retroactive to March 1, 2020 through the end of the emergency declaration to help healthcare providers contain the spread of COVID-19.  The updated waivers were released on April 29, 2020 and are an update from those issued on April 21, 2020.  The goal of the waivers is to make it easier for Medicare and Medicaid beneficiaries to get tested for COVID-19 and to provide flexibility to the healthcare system as America reopens.  Providers may begin to use these waivers immediately.  The changes announced by CMS include new rules to support and expand COVID-19 diagnostic testing for Medicare and Medicaid beneficiaries; increasing hospital capacity; removing barriers for hiring healthcare professionals; decreasing administrative burdens and further expanding telehealth and Medicare.

 COVID-19 Testing

With the new waivers, Medicare will no longer require an order from a treating physician or other practitioner for Medicare beneficiaries to get COVID-19 tests and laboratory tests required for a COVID-19 diagnosis.  COVID-19 tests will be covered when ordered by any healthcare professional who is authorized to do so under state law.  A written practitioner’s orders also are no longer required for Medicare to pay for the COVID-19 test.  For example, a pharmacist can work with a practitioner to provide an assessment and specimen collection with the physician or other practitioner billing Medicare for the services.  Pharmacists can perform COVID-19 tests if they are enrolled in Medicare as a laboratory if it is within the pharmacist’s scope of practice according to state law.  This waiver would allow beneficiaries to get tested at pharmacies and other types of healthcare entities in order to help expand COVID-19 testing capacity.  CMS will pay practitioners to assess beneficiaries and collect laboratory samples for COVID-19 testing and make a separate payment if that is the only service the patient receives.  CMS also announced that Medicare and Medicaid will cover certain serology antibody tests and laboratory processing of certain FDA-authorized tests that beneficiaries may self-collect at home.

Expansion of Hospitals

CMS will allow hospitals to provide services at other health care facilities and sites that are not part of the existing hospital to help address patient needs.  For example, CMS will allow freestanding inpatient rehabilitation facilities to accept patients from acute care hospitals even if the patients do not require rehabilitation care.  The purpose is to make use of available beds in freestanding inpatient rehabilitation facilities to help acute care hospitals make room for COVID-19 patients.  CMS will also pay for outpatient hospital services such as wound care, drug administration, and behavioral health services delivered in a temporary expansion location.  CMS will allow certain provider-based hospital outpatient departments that relocate to off campus sites to continue to be paid under the outpatient prospective payment system.  Additionally, long term acute care hospitals can accept any acute care hospital patients and be paid at the higher Medicare payment rate pursuant to the CARES Act.

Healthcare Professionals

Nurse practitioners, clinical nurse specialists and physicians’ assistants will be allowed to provide home health services pursuant to the CARES Act for beneficiaries who need in-home services.  These licensed practitioners can now order home health services, establish and periodically review a plan of care for home health patients; and certify and recertify that the patient is eligible for home health services.  Previously only a physician could certify a patient for home health services.  This change is effective for both Medicare and Medicaid beneficiaries.  CMS will allow physical and occupational therapists to delegate maintenance therapy services to therapy assistants in an outpatient setting.  As with hospitals, CMS is now waiving a requirement for ambulatory surgical centers to periodically reappraise medical staff privileges during the emergency thereby allowing physicians and other practitioners whose privileges are expiring to continue taking care of patients during the emergency.

Partial Hospitalization Services

CMS will allow the following partial hospitalization services to be delivered in temporary expansion locations including patients’ homes:  individual psychotherapy; patient education; and group psychotherapy.  Community mental health centers may offer partial hospitalization and other mental health services to clients in the safety of their own homes.  CMS will not enforce certain clinical criteria in local coverage determinations that limit access to therapeutic continuous glucose monitors for beneficiaries with diabetes.  Clinicians will have the flexibility to allow more of their diabetic patients to monitor their glucose and adjust insulin doses at home.

Telehealth

CMS is attempting to further expand telehealth for Medicare by waiving limitations on the type of clinical practitioners that can furnish telehealth services.  Previously only doctors, nurse practitioners and physician assistants could deliver telehealth services; however, now other practitioners such as physical therapists, occupational therapists and speech language pathologists can also provide telehealth services.  CMS will allow hospitals to bill for services furnished remotely by hospital-based practitioners to Medicare patients who are registered as hospital outpatients including counseling, educational services, and therapy services.  Hospitals can bill as the originating site for the telehealth services if services furnished by a hospital-based practitioner to Medicare patients when the patient is at home.

CMS is broadening the list of services that can be conducted by audio only telephone to include many behavioral health and patient education services.  CMS will be increasing payments for telephone visits to match payments for similar office and outpatient visits.  The payments will be retroactive to March 1, 2020.  CMS is changing the process to add new telehealth services on a “sub-regulatory basis” by considering prices from practitioners who are now using telehealth.  CMS is now paying for Medicare telehealth services provided by rural health clinics in federally qualified health clinics, allowing beneficiaries located in rural and other medically underserved areas more options to access care from their home without having to travel.

CMS is waiving the video requirement for certain telephone evaluations resulting in Medicare beneficiaries being able to use audio-only telephones to get these services.   The designated codes permissible for audio-only telephone evaluation can be found at https://www.cms.gov/Medicare/Medicare-general-information/telehealth/telehealth-codes.

On April 27, 2020, Governor Abbott issued Executive Order GA-18, implementing Phase I to reopen Texas, beginning May 1, 2020. In addition to confirming that “essential services” shall continue to operate as they have, GA-18 provides guidance on services that may reopen as of 12:01 a.m. on Friday.

“Reopened services” include:

  • Retail services that may be provided through pickup, delivery by mail, or delivery to the customer’s doorstep;
  • In-store retail services up to 25 percent occupancy rate;
  • Dine-in restaurant services up to 25 percent occupancy rate, except restaurants that derive 51% or more of their receipts from alcohol;
  • Movie theaters up to 25 percent occupancy rate;
  • Shopping malls up to 25 percent of mall’s occupancy rate but not food-court, play areas, or interactive displays;
  • Museums and libraries up to 25 percent occupancy rate but not interactive functions or Exhibits;
  • Services provided by an individual working alone in an office; and
  • Golf course operations; and
  • Local government operations.

Governor Abbott states that people and business providing or obtaining services authorized under GA-18 “should follow minimum standard health protocols recommended by DSHS,” found here, and confirms that residents may still engage in essential daily activities such as going to grocery the store or gas station, providing or obtaining other essential or reopened services, visiting parks, hunting or fishing, or engaging in physical activity like jogging, bicycling, or other outdoor sports. Notably, GA-18 encourages individuals to wear face coverings but “no jurisdiction can impose a civil or criminal penalty for failure to wear a face covering, superseding any mandates passed down from Texas cities, counties, and townships.”

What business are not included as a “reopened service”:

  • Bars,
  • Gyms,
  • Public swimming pools,
  • Interactive amusement venues such as bowling alleys and video arcades,
  • Massage establishments,
  • Tattoo studios,
  • Piercing studios, and
  • Cosmetology salons

These businesses are not included in the reopened services and shall remain closed for the present time. Likewise, “…people shall not visit nursing homes, state supported living centers, assisted living facilities, or long-term care facilities.”

GA-18 marks a limited step toward reopening businesses in Texas but still limits certain business segments and the volume of clientele that can be serviced, and violations are punishable by a fine of up to $1,000 or up to 180 days in jail. GA-18 does supersede local orders but only to the extent they “restrict essential services or reopened services allowed by this executive order, allows gatherings prohibited by this executive order, or expands the list of essential services or the list or scope of reopened services.” Accordingly, you should consult with your attorney if you have questions about how this order applies to your business or works in connection with any existing local orders.

On April 14, the Railroad Commission of Texas held a marathon virtual meeting to hear from nearly sixty of the state’s energy leaders including executives from some of the most prominent oil producers and midstream companies, industry analysts, consultants and academics. A reported 20,000 people tuned into the public meeting from across the globe to hear the discussion. The topic of the day – whether government-mandated production cuts should be implemented to help curb the free-fall in oil prices.

The COVID-19 pandemic coupled with Saudi Arabia flooding the market with oil in response to its price war with Russia, has resulted in an extraordinary drop in demand that some argue necessitates government intervention. However, the State has not stepped in to regulate oil production since the 1970s, and the argument for such a move in the fiercely independent realm of Texas oil and gas has been met with strong opposition from other industry leaders.

The market currently has a vast oversupply of oil while demand remains low causing prices to plunge to levels not seen in decades. Proponents of state-mandated production cuts argue that it would help bolster oil prices by cutting down on supply. One executive of a prominent producer active in the Permian Basin went so far as to push for a temporary oil production cut of up to one million barrels per day.

On the other hand, those in the industry opposed to such an idea say that the free market should be allowed to run its course. Others argue that production is already being reigned in organically due to the low oil prices, and that further government-imposed production cuts would have no effect on the global oil price. As one industry analyst argued, “The well-known cure for low oil prices is low oil prices.

Even if production cuts were implemented, it is unclear what the process would look like or how it would be enforced, and at the close of the hearing the matter remained unresolved. The commissioners have not yet stated when they will vote on the issue, but as prices continue to fall, instability in the oil and gas industry appears to be here for the foreseeable future.

Over the past few weeks and months, Texas, the United States, and the world have felt increasingly devastating impacts from COVID-19, commonly known as the coronavirus.  In addition to the dire health concerns, practical realities and government orders in numerous states (including “stay at home” orders) have had and will continue to have an  effect on parties’ ability to perform under their contracts at all, much less in a timely manner and in accordance with all contractual provisions.  This article reviews some basic tenants of Texas contract and commercial law that may affect a party’s obligations with respect to performance hindrances created by COVID-19—force majeure clauses and impossibility of performance.

Force Majeure Provisions: The Terms of the Contract Control

The terms of the contract should be the starting point for any analysis of the effect of COVID-19 on performance under a given contract.  The parties should determine whether the contract contains a force majeure provision, which excuses non-performance of contractual obligations if the inability to perform is caused by some intervening, unforeseeable circumstance outside of the parties’ control, such as an act of God or war.[1]

Most force majeure provisions contain a definition or list of specific events or types of events that trigger the force majeure provision, and often specifically include “epidemics” or “pandemics.”  Texas law defines an epidemic as “the occurrence in a community or region of a group of illnesses of similar nature, clearly in excess of normal expectancy, and derived from a common or a propagated source.”[2]  Texas law defines a pandemic as “a global disease epidemic or an epidemic that crosses international borders and affects an extremely large number of people.”[3]  On March 11, 2020, the World Health Organization (“WHO”) officially declared COVID-19 a pandemic,[4] and the Centers for Disease Control and Prevention (“CDC”) also refer to coronavirus a pandemic.[5]

COVID-19 does qualify as an epidemic and a pandemic, but this is simply the first step.  The specific terms of the force majeure provision must also be examined.  The scope and effect of a force majeure clause depends on the specific contract language, which may differ from traditional definitions of the term force majeure.[6]  Some force majeure provisions contain exceptions, for example, providing that the unavailability of equipment or labor or the failure of performance by subcontractors do not constitute force majeure events.  Texas courts generally enforce contractual provisions, including force majeure provisions, as written.  “When the parties have themselves defined the contours of force majeure in their agreement, those contours dictate the application, effect, and scope of force majeure.”[7]  Texas courts are not at liberty to rewrite the contract or interpret it in a manner that the parties never intended.[8]  Texas courts “presume parties intend what the words of their contract say,” and interpret contract language according to its “plain, ordinary, and generally accepted meaning” unless the instrument directs otherwise.[9]  In particular, sophisticated parties are generally permitted to anticipate and allocate business risks between them, and those terms will generally be seen to be commercially reasonable.[10]

Generally, force majeure provisions excuse performance but do not provide for affirmative relief.  In other words, a party will typically not be held liable for failing to perform under the terms of the contract but will also not be entitled to additional costs or damages incurred due to the force majeure event.  As always, the terms of the contract at issue will control exactly what relief the non-performing party is entitled to, if any.

IMPOSSIBLITY OF PERFORMANCE AND OTHER LEGAL RELIEF

If the contract does not contain a force majeure provisions or similar clause(s),[11] a party’s non-performance may still be excused if the performance is deemed “impossible.”  Under Texas law, a party’s performance may be excused when it is made impracticable or impossible by supervening circumstances.[12]  Courts often look to the foreseeability of the event causing the impossibility or impracticability, but this factor has more recently been deemphasized, and there are certain situations in which a court may still discharge a party of its obligations even when the event was foreseeable and, in fact, was foreseen.[13]  An impossibility may be caused by an impracticability that existed at the time the contract was created, but only if the non-performing party has no reason to know of the impracticability and that party assumed that the impracticability would not exist when it entered into the contract.[14]

Texas courts have specifically held that “the performance of a contract is excused by a supervening impossibility caused by the operation of a change in the law . . . .”[15]   This interpretation could become relevant if executive orders or other instructions from governmental entities prevent performance or make performance impracticable.  However, Texas law is clear that performance will not be excused simply because performance became more economically burdensome than anticipated.[16]  Additionally, if the impossibility was caused by the non-performing party’s voluntary act, performance will not be excused.[17]

In addition to the doctrine of impossibility, “if performance is contingent upon the continued existence of a state of things or set of circumstances, a condition is implied that the cessation of existence of such state of things excuses performance.”[18]  The non-performing party must show (1) an unexpected contingency has occurred, (2) the risk of that contingency was not allocated to either party by agreement, and (3) the occurrence of the contingency has made performance impossible.[19]

CONCLUSION

Texas law provides several avenues of relief for parties who find it impracticable or impossible to perform their contractual obligations during the COVID-19 pandemic, starting with the contract itself.  If a party believes that it may be entitled to relief under its contract or the law, it should contact and notify the other party(ies) as soon as possible and comply with any applicable contractual provisions regarding formal notice.  Communication and documentation will be key during this unprecedented time.  Each contract and factual scenario will present unique issues, and Kean Miller is prepared to help answer any questions and guide parties through any issues that they may face.

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[1] See Black’s Law Dictionary 761 (10th ed. 2014); Sun Oper., L.P. v. Holt, 984 S.W.2d 277, 282–83 (Tex. App.—Amarillo 1998, pet. denied); Valero Transmission Co. v. Mitchell Energy Corp., 743 S.W.2d 658, 663 (Tex. App.—Houston [1st Dist.] 1987, no writ).

[2] 25 Tex. Admin. Code § 97.1 (13).

[3] 25 Tex. Admin. Code § 97.1 (22).

[4] World Health Organization, WHO Director-General’s opening remarks at the media briefing on COVD-19 – 11 March 2020 (March 11, 2020).

[5] Centers for Disease Control and Prevention, Coronavirus Disease 2019 (COVID-19): Situation Summary (updated April 7, 2020) https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/summary.html (last visited April 7, 2020).

[6] Virginia Power Energy Mktg., Inc. v. Apache Corp., 297 S.W.3d 397, 402 (Tex. App.—Houston [14th Dist.] 2009, pet. denied).

[7] Sun Oper., 984 S.W.2d at 283. See also TEC Olmos, LLC v. ConocoPhillips Co., 555 S.W.3d 176, 181 (Tex. App.—Houston [1st Dist.] 2018, rev. denied); Zurich Am. Ins. Co. v. Hunt Petrol. (AEC), Inc., 157 S.W.3d 462, 466 (Tex. App.—Houston [14th Dist.] 2004, no pet.).

[8] Sun Oper., 984 S.W.2d at 283.

[9] URI, Inc. v. Kleberg Cty., 543 S.W.3d 755, 764 (Tex. 2018).

[10] See PPG Indus., Inc. v. Shell Oil Co., 919 F.2d 17, 19 (5th Cir. 1990).

[11] The doctrine of impossibility will not apply where the risk was allocated by agreement. See In re Doe, 917 S.W.2d 139, 142 (Tex. App.—Amarillo 1996, writ denied).

[12] Centex Corp. v. Dalton, 840 S.W.2d 952, 954–55 (Tex. 1992).

[13] Id.

[14] Solar Soccer Club v. Prince of Peace Church of Carrollton, 234 S.W.3d 814, 824 (Tex. App.—Dallas 2007, pet. denied); Janak v. FDIC, 586 S.W.2d 902, 906–07 (Tex. App.—Houston [1st Dist.] 1979, no writ).

[15] Centex Corp., 840 S.W.2d at 954.

[16] Huffines v. Swor Sand & Gravel, 750 S.W.2d 38, 40 (Tex. App.—Forth Worth 1988, no pet.).

[17] Stafford v. Southern Vanity Magazine, Inc., 231 S.W.3d 530, 537 (Tex. App.—Dallas 2007, pet. denied) (defendant had transferred stock to a third party, so could not use defense of impossibility to prevent judgment directing it to transfer stock to plaintiff as agreed).

[18] In re Doe, 917 S.W.2d at 142.

[19] Id.

As the coronavirus continues to adversely impact so many, the court systems across the country are adapting in kind, with many of them suspending jury trials and moving to reduced-contact scenarios for other matters. Below is a digest of the most up-to-date information regarding courts in Texas as of the time of this posting. Please check back often as this information may be updated.

  1. Eastern District of Texas: Attorneys and parties were ordered to communicate if court proceedings could cause someone to come into contact with an individual exposed to or infected with the virus.
  2. Northern District of Texas: All courthouses are open. However, civil and criminal bench and jury trials from March 13th to May 1st will be continued and rescheduled for a later date.
  3. Southern District of Texas: All jury trials are suspended until May 1st. The federal courthouse in Houston and Galveston will remain open for other matters, including matters scheduled for hearing in bankruptcy court. Docketing and most other tasks will be handled remotely. Bankruptcy judges have agreed to conduct most hearings by telephone or video conferencing.
  4. Western District of Texas: All civil and criminal bench and jury trial cases will be continued and rescheduled from now until May 1st.
  5. The Texas Supreme Court: Issued guidance calling on courts to suspend proceedings or schedule them to avoid gatherings of large groups of people until at least April 1st, including jury trials and large docket calls. It is encouraging courts to implement remote appearances by phone or video for all proceedings that may occur remotely.
  6. S. Court of Appeals for the Fifth Circuit: Plans to hold pending oral arguments as scheduled as of this posting.
  7. Harris County Civil District Court: All civil jury trials are suspended through April 30th. Effective March 18th, the Harris County District Clerk’s office will suspend in-person services to the public. The county courthouses remain open. Parties with cases in district or county courts should contact their courts regarding their respective dockets. The courts will review this situation regarding plans on an ongoing basis. The Harris County District Attorney’s office is closed. Effective March 23rd, the Criminal Justice Center, the Juvenile Center and the Civil Courthouse will be open from 7 a.m. to 6 p.m. Monday through Thursday.
  8. Bexar County: All jury trials are suspended jury trials from March 16th to April 16th. Dismissal Docket for the weeks of March 24th, April 7th and April 14th have been cancelled. Only the Reinstatement Docket will be heard on those dates in the 408th District Court.
  9. Brazoria County: Jury duty is cancelled through end of April. The courthouse and all annexes will remain open, with reduced staff.
  10. Cameron County: Jury duty is cancelled. Further court information still pending.
  11. Collin County District Courts: All nonessential court matters, in-person hearings, and trials from March 16th to April 1st are rescheduled. Essential matters, including temporary restraining orders, temporary injunctions and any suits or hearings with jurisdictional deadlines, are not affected as of the time of this posting. Attorneys must contact each court regarding each setting. No uncontested matters will be heard. The courts are developing a plan for electronic appearances. All walk-in traffic at county buildings is suspended.
  12. Dallas County: No civil or criminal jury trials held through May 8th. The District Clerk’s office is closed to in person services. Dallas County Tax Offices and Passport Offices are closed to in-person services.
  13. Fort Bend County: The District Clerk’s office is closed to the public until April 3rd. Jury service has been suspended for ALL district, county and justice of the peace courts through May 8th.
    • 268th District Court – All dockets have been cancelled through March 20th. Civil cases: All parties should contact the Court to reschedule all hearings and trials.
    • 328th, 387th and 505th – Family Courts. If a party requests a reset between now and April 3rd, that reset will be granted. All other cases will be heard as scheduled subject to the Court’s discretion. Hearing dates and reset dates will be given for dates after April 13th.
  14. Jefferson County: Each court shall exercise its own discretion on a case-by-case basis regarding hearings and the calling of bench trials and jury trials.
  15. Montgomery County: As of the time of this posting, all court operations, including jury service, will remain open and normal with all services available. The District Clerk’s office will be operating with reduced staff. The office will be open, but the public is strongly urged to call instead of coming in person.
    • 284th District Court – All jury trials for the month of March and April are cancelled. Courtroom activity will be limited to bench trials, temporary injunction hearings, minor settlements, Robinson Challenges, and structured settlements. Reset matters by calling at least 3 days in advance. All other matters will be moved to and set on a submission docket.
  16. Nueces County: All jury trials canceled. All other court business will continue as normal. Courts are basically adjourned unless there is an urgent matter. Remote proceedings will begin.
  17. Tarrant County: Jury trials are suspended until April 20th. This affects criminal district courts, county criminal courts, county courts at law, civil, family, probate courts and justice of the peace courts.
  18. Travis County: Civil and family courts are suspending non-emergency hearings until April 13th, impacting all jury trials, bench trials, and non-essential hearings.

Kean Miller obtained the dismissal of a suit filed against its client, a foreign manufacturer of an industrial product who was sued by the Texas purchaser of the product, because the Texas court did not have personal jurisdiction over the manufacturer. A Texas court of appeals recently affirmed this dismissal.

After the foreign manufacturer filed its exception to the trial court’s jurisdiction, the parties conducted discovery regarding the manufacturer’s contacts with Texas, stipulated certain facts, and filed affidavit regarding these contacts. The trial court dismissed the case for lack of personal jurisdiction over the manufacturer. The plaintiff appealed.

In order for a Texas court to have jurisdiction over a party before it, the party must have had sufficient contacts that were purposefully directed at the state, seeking some benefit, advantage, or profit. A court’s analysis of personal jurisdiction is a multi-step process. In considering whether the Texas court had jurisdiction over the manufacturer, the appeals court focused on a number of facts.

  • Foreign location.   The manufacturer was a foreign company with its principal place of business in that country.
  • Title and risk of loss. Although the three contracts between manufacturer and the purchaser required the manufacturer to pay to insure and ship the product to the Port of Houston, the terms of the contracts (“CIF Houston Port, TX, USA”) provided that that title to the product and the risk of loss transferred to the purchaser when the product was loaded on the ship in the foreign country.
  • Foreign law and arbitration.   The contracts selected the law of the manufacturer’s country to govern their interpretation and application, and specified that disputes would be arbitrated in that country.
  • Minimal sales in Texas. The appeals court found that these contractual terms were not an effort to avoid Texas jurisdiction for two reasons: first, the manufacturer did not have a sales agent in Texas; second, while the manufacturer had executed 100 contracts with Texas residents for the sale of $51 million of product over a five–year period, these sales accounted for only 2.27% of its sales inthose years. The court observed that Texas courts have found there was no jurisdiction over a company with “many more goods flowing into and out of” the state than in this case.
  • No other purposeful activities. Nor was there any of the other “additional conduct” required to convert a manufacturer’s act of placing a product into the stream of commerce into an act that was purposefully directed at the state: the manufacturer had not designed the product specifically for marketing in Texas, did not advertise in Texas, and had not established channel to provide regular advice to customers in Texas.

The appellate court’s opinion demonstrates that Texas courts look critically at the facts of each case to determine whether a court has jurisdiction over a foreign company, and that significant discovery will probably be required before an exception to jurisdiction can be submitted to the trial court.

At the time In re XTO Energy (In re XTO Energy, Inc., 2018 WL 2246216 (Tex. App.-Houston [1st Dist.]) was decided by the 1st Court of Appeal in May of 2018, Texas Appeals Courts had already issued a slew of cases in preceding years that looked very favorably upon defendant forum non conveniens motions when the incident, most of the witnesses, and evidence were located outside the State of Texas.   Defendants had obtained mandamus relief in numerous decisions leading up to In re XTO Energy: In re Mantle Oil & Gas (In re Mantle Oil & Gas, LLC, 426 S.W.3d 182, 187 (Tex. App.-Houston [1st Dist.] 2012, orig. proceeding), In re BPZ Resources Inc. (In re BPZ Res., Inc., 359 S.W.3d 866, 875 (Tex. App.-Houston [14th Dist.] 2012 orig. proceeding), and In re Transco (In re Transcontinental Gas Pipeline Co., LLC, 542 S.W.3d 703 (Tex. App.-Houston [14th Dist.], 2017).

The courts, in all those matters, found that the six forum non conveniens factors overwhelmingly gravitated in favor of a dismissal motion under Texas Rule of Civil Practice 71.051 (b), despite the trial court’s denial of the motion.  Because the accidents took place outside the state of Texas, because most witnesses, evidence and investigative agencies were located outside of the state of Texas, and given the availability of an appropriate alternate forum, it was too much for the appeals court to overlook, and reversed the trial court’s ruling in each of those cases.

In contrast, a recent decision by the 14th Court of Appeal, has taken predominately similar facts and affirmed the trial court’s denial of such a motion, keeping the matter in Harris County.  A review of the case indicates the existence of factors that would normally tilt the forum non-convenience decision towards dismissal.

In In re Friede & Goldman, LLC (In re Friede & Goldman, LLC, 2019 WL 2041071 (Tex. App.-Houston [14th Dist.], forty-four plaintiffs filed suit in Harris County based on an accident arising out of an off-shore oil well in the Bay of Campeche, which are territorial waters of Mexico.  One worker died, and numerous other workers, most of which were citizens of Mexico, were injured.  The worker plaintiffs were all working for Mexico-based employers at the time of the incident, and all Mexico-based health care providers treated their injuries.  At the time of the incident, the vessel was contracted to Mexico’s National Oil Company.  Defendants moved to dismiss the suit on the grounds of forum non conveniens, but the motion was denied by the trial court.

The 14th Court of Appeal examined the six forum non conveniens factors.  An alternate court (in Mexico) offered an available forum, and the laws of Mexico offered an adequate remedy at law. The evidence further established most of the relevant documents in evidence, and most of the witnesses to the incident, were located in Mexico, although the vessel in issue had been constructed in China and there was some conflicting evidence that the ship manager, operator and technical manager of the vessel was a German entity.  The matter was being investigated in Mexico, and in accordance with Mexican regulations.

The Court further found that no other litigation was pending in Texas so there was no duplication of litigation to weigh in favor of keeping the case in Harris County. Finally, with regard to whether Mexican courts could exercise jurisdiction over the defendants, the Court found in favor of dismissal as well, as all defendants stipulated to the jurisdiction of the Mexican court system.

Seemingly de-emphasizing the above facts, the Court focused on the substantial injustice factor and, without much analysis either way, provided great deference to the trial court’s determination that this factor weighed in favor of neither dismissal nor maintaining the action in Harris County. Finally, the Court observed that neither the relator nor the plaintiffs put on any evidence of “the extent to which injuries resulted from acts or omissions that occurred in Texas”, and as a result, the Court could make no determination with regard to that factor.

Weighing all the factors, the Court surprisingly denied the writ of mandamus, affirming the trial court’s decision.

It is unclear whether this case is an aberration, or a shift in precedent as to what constitutes “inconvenience” for the purpose of the forum non conveniens analysis.  It is fair to say that there is no longer a de-facto presumption that industrial accidents that occur outside of the state of Texas, involving foreign entities, with non-Texas plaintiffs and non-Texas evidence and witnesses, will summarily be dismissed under Texas Rule of Civil Practice 75.051.

In an attempt to mitigate risk, most commercial contracts contain a provision limiting monetary recovery. The most common provision is a waiver of consequential damages. Despite the parties’ best intentions, whether a category of damages are considered direct damages or consequential damages is often determined on a case-by-case basis.  Texas courts have provided the following general framework.

Direct damages are “the necessary and usual result of the defendant’s wrongful act; they flow naturally and necessarily from the wrong.”[1] Direct damages are intended to compensate the plaintiff for the loss incurred that was foreseeable by the defendant from his wrongful act.  Consequential damages, on the other hand, may “result naturally, but not necessarily, from the defendant’s wrongful acts.”[2]  Consequential damages must be foreseeable and must trace directly back to the wrongful act in order to be recoverable.

While a seemingly simple test, Texas courts have had varying outcomes depending the specific facts and circumstances. In Powell Electric Systems, Inc. v. Hewlett Packard Co.,[3] Powell and Hewlett Packard contracted for the installation, testing, and repair of a new transformer. During installation, Powell negligently connected a new transformer resulting in damages to Hewlett’s facilities. The court analyzed each of the damage items submitted by Hewlett and held that those specific items contemplated at the time of contract, such as repair costs, increased labor, facilities, and costs of materials, were all considered direct damages. However, the court ruled that a temporary transformer used in place of the defective transformer was not contemplated in the contract and, therefore, considered a consequential damage – waived under the contract’s damage limitation provisions.

In Cherokee Cty. Cogeneration Partners, L.P. v. Dynegy Mktg. & Trade,[4] the court held that the lost profits on the contract itself were direct damages, but the lost profits on other contracts for the sale of electricity produced by the facility were consequential damages.  The court opined that the parties’ contract contemplated the purchaser’s ability to profit from resales of the purchased gas as a higher price, so that those lost profits were considered direct damages.

In Continental Holdings, Ltd. v. Leahy,[5] the parties’ dispute centered on the wrongful termination of a contract for a vessel. The parties disagreed on whether Continental was entitled to the unrealized charter hire Western initially contracted. The court held that “lost profits damages may take the form of ‘direct’ damages or the form of ‘consequential’ damages.”[6] Those profits lost on the breached contract itself, such as the amount the non-breaching party would have received, less expenses saved, are considered direct damages. However, lost profits on other contracts or relationships resulting from the breach are indirect damages.

Thus, as we have seen through this sample of cases, while the Texas courts generally respect the parties’ contractual language classifying certain damages as direct or consequential, the courts will closely examine the circumstances giving rise to the claim. Depending on whether you are the breaching party or non-breaching party, we can assist you in determining what damages are recoverable.

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[1] Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 816 (Tex. 1997).

[2] Id.

[3] 356 S.W.3d 113, 117 (Tex. App.—Houston [1st Dist.] 2011, no pet. h.).

[4] 305 S.W.3d 309, 315 (Tex.App. —Houston [14th Dist.] 2009, no pet. h.)

[5] 132 S.W. 3d 471, 473 (Tex. App.—Eastland 2003, no pet. h.).

[6] Id. at 475.