The Austin Court of Appeals has put the final kibosh on a decade-long lawsuit brought by investors in power plants against ERCOT and four of its directors for allegedly misleading them about the capacity of the generation market in 2011 and 2012.
Panda Sherman Power Intermediate Holdings I, LLC; Panda Power Generation Infrastructure Fund, LLC, d/b/a Panda Power Funds; and Panda Sherman Power Holdings, LLC v. H.B. “Trip” Doggett, Warren Lasher, Bill Magness, and Kent Saathof (No. 03-18-00695-CV; filed November 28, 2023) is the final piece of sprawling litigation that has already twice gone to the Texas Supreme Court. Panda filed the present case in Travis County district court against the directors after a similar suit against ERCOT and the directors was dismissed by a Grayson County district court. The Grayson County case eventually wound its way up to SCOTX, which (in an opinion we reported) held that PURA § 39.151 establishes a “pervasive regulatory scheme” giving the PUC exclusive jurisdiction over ERCOT,” including “adjudicatory power” to hold ERCOT accountable for unlawful conduct. Thus, Panda’s claims that the PUC and its directors published allegedly fraudulent “CDRs” (Report on Capacity, Demand, and Reserves) upon which Panda relied to make $2 billion in investments in new generation assets in Texas came squarely within the PUC’s exclusive jurisdiction. Consequently, Panda failed to exhaust its administrative remedies under PURA, depriving the courts of jurisdiction. See CPS Energy v. Electric Reliability Council of Texas, Inc., 671 S.W.3d 606 (Tex. 2023)(Panda II).
The Austin Court of Appeals abated Panda’s appeal of a Travis County district court’s order granting the executives’ plea to the jurisdiction and TCPA motion to dismiss pending the outcome of Panda II. With that decision in hand, the court had no difficulty extending it to Panda’s case against the directors. Although employees of entities entitled to sovereign immunity may be sued in their individual capacities for tortious activity, here Panda’s claims were substantially the same as those asserted against ERCOT in the other lawsuit: that they published allegedly fraudulent statutorily mandated CDRs. These claims concerned “wheter ERCOT ‘properly performed’ its operations, functions, and duties” and fell within the PUC’s exclusive jurisdiction. Moreover, as “governmental and corporate entities can only act through their officers, directors, and employees,” complaints about “how ERCOT’s officers and employees carry out those statutory functions—the only means through which ERCOT can effectuate its functions—must also be raised first at the PUC. To hold otherwise would frustrate the purposes of agency exclusive jurisdiction, allow for the possibility of inconsistent dispositions of identical disputes due merely to the capacity in which government employees are sued, and unnecessarily tax judicial resources” (citations omitted).
Having poured out Panda on the sovereign immunity issue, the court turned to the directors’ TCPA motion. Panda argued that since the trial court had no jurisdiction over its claims to beging with, it likewise had no jurisdiction to consider and grant the TCPA motion and award attorney’s fees and sanctions. The court did not buy this argument based on its recent precedent, which held that a “TCPA ‘legal action’ is not limited to filings over which [a] court has jurisdiction but also includes [a] litigant’s successful challenge on jurisdictional grounds.” See de la Torre v. de la Torre, 613 S.W.3d 307, 314-15 (Tex. App.—Austin 2020, no pet.). Proceeding to a TCPA analysis, the court held that the TCPA applied to Panda’s claim because reports produced as part of ERCOT’s statutorily required duties involve matters of public concern “both because they concern a good or service in the marketplace (i.e., electricity and its generation and delivery) and because the power grid and its reliability constitute a component of community well-being.” The question then became whether, as Panda argued, the commercial speech exemption applies. Here the court held that it did not the executives were not “primarily engaged in the business of selling or leasing goods [or services],” thus failing the first prong of a four-pronged test established by SCOTX in Castleman v. Internet Money Ltd., 546 S.W.3d 684, 688 (Tex. 2018). Instead, the court determined, the executives were primarily engaged in ERCOT’s “business” of carrying out its statutory duties, hardly a “commercial enterprise.”
Finally, the court determined that the executives proved by a preponderance of the evidence their jurisdictional defense, so it did not need to consider whether Panda had established a prima facie case on each element of its fraud claim. It further held that the trial court’s award of attorney’s fees and sanctions to the executives should stand, even though ERCOT paid for the executives’ defense (citing Aviles v. Aguirre, 292 S.W.3d 648, 649 (Tex. 2009), in which SCOTX held that fees “incurred by” a movant “is satisfied if the fees are paid by someone else”).
So closes the final chapter of a long-running case that definitely established ERCOT’s (or any future independent system operator’s) entitlement to sovereign immunity and the PUC’s exclusive jurisdiction over the electricity market in Texas.
