The 14th Court of Appeals has affirmed a multi-million-dollar judgment against Centerpoint Energy in a negligence action alleging negligence in the maintenance of an electric transformer on a property subsequently damaged by fire. The case, Centerpoint Energy Houston Electric, LLC v. Howard E. Coleman and Coleman Upholstery, Inc. (No. 14-20-00250-CV) arose from a 2010 fire that caused significant damage to Coleman’s automobile upholstery business. Coleman sued Centerpoint for negligently maintaining the transformer and related equipment. Both sides presented extensive expert testimony regarding the circumstances and cause of the fire. The jury returned a verdict awarding Coleman more than $3.6 million for lost profits, $800,000 for past property damage, $450,000 for past damage to personal and business credit, and $50,000 for damages to future personal and business credit. The trial court remitted the lost profits damages award to about $2.76 million and awarded over $5.8 million in total.

On appeal, Centerpoint argued three issues: (1) jurisdiction, (2) sufficiency of the evidence, and (3) the trial court’s overruling of certain evidentiary objections. With regard to the jurisdictional challenge, Centerpoint argued that Coleman did exhaust his administrative remedies at the PUC before bringing suit. The question for the court of appeals was whether common law tort or breach of contract claims fall within the scope of the PUC’s exclusive original jurisdiction. Reviewing a line of recent SCOTX authority, the court of appeals concluded that Coleman was not an “affected person” subject to PURA for purposes of his tort claim (which did not challenge utility rates or services), and that his claim did not fall within PURA’s pervasive regulatory scheme (PUC does not have original exclusive jurisdiction because “Coleman’s allegations do not concern issues that the PUC normally regulates”). The court of appeals relied heavily on SCOTX’s plurality opinion in In re CenterPoint Energy Houston Electric, LLC, 629 S.W.3d 149 (Tex. 2021), which held that a wrongful death action against a utility arising from a downed power line and negligence in the selection of fuse size for the line did not have to begin in the PUC. Specifically, the court noted that the plurality found that administrative regulations regarding applicable safety and reliability standards were “too general to supply a standard of care in a negligence case, stating ‘regulations generally requiring a party to act safety or reasonably do not substitute a legislative imposed standard of conduct for the reasonable person standard of common-law negligence.”

With respect to the sufficiency challenges, the court of appeals parsed the testimony of the dueling experts and concluded that the jury could reasonably conclude that CenterPoint breached a duty of care in failing to inspect and test the transformer when they responded to a service call prior to the fire, and that the breach proximately caused the fire that damaged the plaintiff’s property. The court of appeals repeatedly stated that CenterPoint “misconstrued” Coleman’s theory of liability, which would have required evidence that the company’s failure to “(1) adopt a formal, proactive maintenance program for its transformers, and (2) provide all of its service technicians with Megger devices and mandate the regular use of such devices in maintaining transformers caused the fire and resulting damages.” Instead, the court opined, Coleman’s claim centers on CenterPoint’s failure to conduct more than a cursory visual inspection of the transformer and high voltage bushing or perform a diagnostic test of the transformer because they said they lacked the proper equipment.

CenterPoint further argued that the lost profits damages were excessive and unsupported by sufficient evidence. The court rejected the argument, holding that the jury was within its discretion to accept the testimony of Coleman’s financial expert over that of the company’s expert. Similarly, the court of appeals turned aside CenterPoint’s objection to the trial court’s admission of evidence regarding Coleman’s loss of past and future personal and business credit.

It is not as clear to us as it was to the court of appeals that CenterPoint that the utility “misconstrued” the plaintiff’s theory of liability. The court’s rejection of the jurisdictional argument really on whether the PUC’s administrative regulations regarding safety are sufficiently specific to govern the service crew’s conduct in this case. In reaching the conclusion that they were not, the court relief on a plurality opinion of SCOTX which may or may not mean everything the court of appeals attributed to it, particularly the court’s more or less conclusory assertion that the regulations cited by CenterPoint were too “general” to constitute a standard of care for purposes of common-law negligence. It seems to us that standard maintenance procedures are part of the PUC’s regulatory scheme, that there are recognized national safety protocols that govern the repair and maintenance of transformers and related equipment, and that to the extent that additional tort duties might be imposed by the common law, such duties certainly affect both customer service and utility rates. This is a published opinion and will go into the books as precedent. This one might well warrant higher review.

Pin It on Pinterest

Share This