Texas Supreme Court punts on whether ERCOT is immune from storm lawsuits

Source: By Paul Takahashi, Houston Chroncile • Posted: Monday, March 22, 2021

Five justices led by Justice Jeff Boyd said the Texas Constitution prohibits them from ruling on the case after the trial court issued a final judgment dismissing the case. Based on a finding of sovereign immunity by an appeals court, the Supreme Court narrowly ruled that the dismissal by the lower court in Dallas made the case moot and that it no longer had the authority to rule in the case.

“Because the trial court’s interlocutory order merged into the final judgment and no longer exists, we cannot grant the relief the parties seek,” Boyd wrote in the majority opinion. “As a result, any decision we might render would constitute an impermissible advisory opinion, and these consolidated causes are moot.”

Four dissenting justices led by Chief Justice Nathan Hecht, argued that they should rule on the case because the public has an interest whether ERCOT can be sued in the aftermath of last month’s storm.

“The answer to the immunity issue in this case has become perhaps more important to the public than even to the parties,” the minority opinion, written by Hecht stated. “The parties want to know. The public wants to know. The court refuses to answer.”

The ruling by the high court has widespread implications in the wake of last month’s deadly and devastating blackouts, which contributed to more than 50 deaths and billions of dollars of property damage across Texas. Several lawsuits have been filed against the state grid manager, including over the deaths of an 11-year-old boy and a 95-year-old man, who were both found dead in their freezing Houston-area homes.

ERCOT said it remains immune from lawsuits under a 2018 decision by a Dallas appellate court, which upheld ERCOT’s sovereign immunity.

“Today, the Texas Supreme Court decided on procedural grounds not to take up Panda Power’s challenge to the Dallas Court of Appeals’ 2018 decision that ERCOT is immune from suit,” an ERCOT spokeswoman said. “ERCOT looks forward to presenting these arguments in the court again once the pending case in the Dallas Court of Appeals has concluded.”

Larry Taylor, a Dallas-based attorney who represents several families in lawsuits against ERCOT stemming from the power outages last month, said the lack of a decision by the Supreme Court leaves open the possibility for his clients’ claims to be heard.

“The Court today ruled in a business dispute. Our cases involve personal injury, property damage and wrongful death,” Taylor said. “We sincerely hope ERCOT has heard from the people, the Texas legislature, and the courts, and understands these are problems in the system they need to address head-on and not hide behind sovereign immunity.”

The Supreme Court could still decide on ERCOT’s immunity as appeals from the Panda Power case come up through the legal system, said David Coale, an appellate partner with Dallas-based law firm Lynn Pinker Hurst & Schwegmann, which is not involved in any cases.

“The court may have punted, but it didn’t walk away,” Coale said. “It acknowledged that another appeal involving the same parties is on its way up to them, and it can revisit these issues then.”

Panda Power sued ERCOT in 2016, alleging that the grid operator issued “seriously flawed or rigged” energy demand projections that prompted the Dallas power company to invest $2.2 billion to build three power plants early last decade. The plants, held by Panda holding companies, ended up losing billions of dollars, forcing one of the holding companies into bankruptcy.

ERCOT’s reports calling for more power generators came in the aftermath of a major ice storm in February 2011, which crippled Texas power plants and forced rolling blackouts across the state.

Panda Power’s case was halted in 2018 when an appeals court in Dallas asserted that ERCOT was protected from lawsuits by sovereign immunity. The Texas Supreme Court in June 2020 said it would review the appellate court decision and heard the case in September.

ERCOT, in court filings, argued that it needs immunity from lawsuits because it is funded by transaction fees paid by power generators. A large damage verdict, ERCOT argued, would mean it would have to allocate the cost among the generators, which in turn, would pass it along to consumers in the form of higher electricity prices.

ERCOT does not receive taxpayer funding.

More than 4 million Texans — including 1.4 million CenterPoint customers in the Houston area — were without reliable power for days during the power failure last month. The rolling blackouts created a cascading ripple effect, causing water systems to fail, food to spoil and homes, businesses and schools to suffer billions of dollars of property damage from frozen and broken water pipes.

At least 30 deaths in the Houston area, have been linked to the blackouts, including from prolonged exposure to freezing temperatures, loss of essential medical devices and carbon monoxide poisoning as people sought warmth by running cars, portable generators and barbecue grills indoors.