The following are summaries of selected opinions issued by the Texas Supreme Court in June 2024. These summaries are prepared by court staff as a courtesy and are not a substitute for the actual opinions. The summaries are overviews of the opinions; please review the entire opinions.
CONSTITUTIONAL LAW: Statutory regulations governing public insurance adjusters do not implicate protected speech.
Tex. Dep’t of Ins. v. Stonewater Roofing, Ltd., No. 22-0427, ___ S.W.3d ___ (Tex. June 7, 2024).
The issues in this challenge to Texas’ regulatory scheme for public insurance adjusters are whether professional licensing and conflict-of-interest constraints (1) restrict speech protected by the First Amendment and (2) are void for vagueness under the Fourteenth Amendment.
Stonewater offers professional roofing services but is not a licensed public insurance adjuster. A dissatisfied commercial customer claimed that Stonewater was illegally advertising and engaging in insurance-adjusting services.
To avoid statutory penalties, Stonewater sued the Texas Department of Insurance (TDI), seeking a declaration that two Texas Insurance Code provisions violate the U.S. Constitution. The first requires a license to act or hold oneself out as a public insurance adjuster. The second prohibits a contractor, whether licensed as an adjuster or not, from
(1) serving as both a contractor and adjuster on the same insurance claim and (2) advertising dual-capacity services.
TDI filed a Rule 91a motion to dismiss, which the trial court granted but the court of appeals reversed.
The Supreme Court reversed and dismissed the suit, holding that Stonewater’s pleadings failed to state cognizable First and Fourteenth Amendment claims. Properly construed, the challenged statutes are conventional licensing regulations triggered by the role a person plays in a nonexpressive commercial transaction, not what any person may or may not say. Neither the regulated relationship (acting “on behalf of” the insured customer) nor the defined profession’s commercial objective (“settlement of an insurance claim”) is speech. False advertising about prohibited activities is not protected speech, and any incidental speech constraints are insufficient to invite First Amendment scrutiny. Additionally, Stonewater’s as-applied and facial vagueness claims were foreclosed because the company’s alleged conduct clearly violated the statutes.
Justice Blacklock concurred, concluding that no speech is implicated because only representative, or agency, capacity is regulated.
Justice Young’s concurrence emphasized two points. First, in his view, regulating agency capacity is nearly irrelevant to the First Amendment’s applicability; what is determinative here is that the challenged statutes, at their core, regulate nonexpressive conduct. Second, extant First Amendment jurisprudence is poorly equipped to address legitimate
public-licensing regulation that affects speech or expressive conduct more than incidentally.
TAX PROTESTS: Unsuccessful ad valorem tax protest does not preclude subsequent motion to correct appraisal roll.
J-W Power Co. v. Sterling Cnty. Appraisal Dist., No. 22-0974, and J-W Power Co. v. Irion Cnty. Appraisal Dist., No. 22-0975, ___ S.W.3d ___ (Tex. June 7, 2024).
The issue in these consolidated cases is whether an unsuccessful ad valorem tax protest under Section 41.41 of the Tax Code precludes a subsequent motion to correct the appraisal roll under Section 25.25(c) with respect to the same property.
J-W Power Company leases natural gas compressors to neighboring counties. The compressors at issue here were maintained in Ector County and leased to customers in Sterling and Irion counties. Between 2013 and 2016, the appraisal districts of Sterling and Irion counties appraised the leased compressors as conventional business-personal property. This was despite the fact that the Legislature amended the Tax Code in 2011 so that leased heavy equipment like the compressors would be taxed in the county where it is stored by the dealer when not in use.
J-W Power filed protests in Sterling and Irion counties under Section 41.41 of the Tax Code, arguing that its compressors should be taxed elsewhere, but the protests were denied by the counties’ appraisal review boards. J-W Power did not seek judicial review.
After the Supreme Court clarified in 2018 that leased heavy equipment should be taxed in the county of origin, J-W Power filed motions under Section 25.25 to correct the appraisal rolls for the relevant years. After the appraisal review boards again denied J-W Power’s motions, J-W Power sought judicial review.
The trial court granted summary judgment for the districts. The court of appeals affirmed, holding that the denial of J-W Power’s Section 41.41 protests precluded subsequent motions to correct because of the doctrine of res judicata.
The Supreme Court reversed. Without deciding whether the elements of res judicata had been met, the Court held that Section 25.25(l), which allows a Section 25.25(c) motion to be filed “regardless of whether” the property owner protested under Chapter 41, eliminates any preclusive effect a prior protest may have had. The Court remanded the case to the court of appeals for further proceedings.
ADMINISTRATIVE LAW: Order adjusting electricity pricing during winter storm did not exceed commission’s authority.
Pub. Util. Comm’n of Tex. v. Luminant Energy Co., No. 23-0231, ___ S.W.3d ___ (Tex. June 14, 2024).
The main issue in this case is whether orders issued by the Public Utility Commission (PUC) during Winter Storm Uri exceeded the PUC’s authority under Chapter 39 of the Public Utility Regulatory Act.
The 2021 storm’s record-low temperatures caused almost 50 percent of Texas’
power-generation equipment to freeze and go offline. The resulting imbalance in the supply and demand of electricity put the state’s electrical grid on the brink of collapse.
The wholesale price of electricity is determined by a complex mathematical formula administered by the Electric Reliability Council of Texas (ERCOT). When mandatory blackouts failed to return the grid to equilibrium, the PUC determined that its pricing formula was sending inaccurate signals to market participants about the state’s urgent need for additional power. In two orders, the PUC directed ERCOT to adjust the formula so that electricity would trade at the regulatory cap of $9,000/MWh instead of at the lower price the formula was producing.
Luminant challenged the orders in a statutory suit for judicial review against the PUC in the court of appeals. Chapter 39 states that the PUC “shall” use “competitive rather than regulatory methods to achieve the goals of [the] chapter to the greatest extent feasible.”
The court of appeals agreed with Luminant that the orders violated Chapter 39’s charge by directing ERCOT to set a single price for electricity.
The Supreme Court reversed and rendered judgment affirming the orders. After rejecting the PUC’s jurisdictional challenges to Luminant’s suit, the Court turned to the merits. Luminant’s challenge rested on Chapter 39’s express preference for competition over regulation. But the Court pointed to other language in Chapter 39 commanding the PUC and ERCOT to ensure the reliability and adequacy of the electrical grid and acknowledging that the energy market will not be completely unregulated. After applying the whole-text canon of statutory construction, the Court held that Luminant had not overcome the presumption that agency rules are valid. The Court went on to hold that the orders substantially complied with the Administrative Procedure Act’s emergency rulemaking procedures.