The Beaumont Court of Appeals has in all likelihood closed the door on MDL plaintiffs’ attempts to hold various investor entities liable for a chemical plant explosion.
In re First Reserve Management, L.P., First Reserve Corporation, L.L.C., FR XII Alpha AIV, L.P., FR XII-A Alpha AIV, L.P., FR Sawgrass, L.P., SK Sawgrass, LP, SK Capital Partners, LP, Sawgrass Holdings, L.P., and Sawgrass Holdings GP LLC (No. 09-00203; February 13, 2025) marks another chapter in the long-running MDL stemming from the November 2019 TPC plant explosion in Port Neches. SCOTX addressed the matter in In re First Reserve Mgmt., L.P., 671 S.W.3d 653, 660-63 (Tex. 2023), holding that the MDL cour should have granted FirstReserve’s Rule 91a motion to dismiss because plaintiffs’ third amended petition “made no factual allegations to show a cause of action with a basic in law against First Reserve for TPC’s conduct.” Since a bankruptcy court had stayed the proceedings, however, SCOTX did not grant mandamus relief at that time.
Back in the MDL court, plaintiffs filed an eighth amended petition adding SK Capital Partners, LP as a defendant. The First Reserve entities (Relators) once again filed a joint Rule 91a motion and asked the court to dismiss all claims asserted in the eighth amended petition. The court denied the motion. Relators filed a joint petition for writ of mandamus in June 5, 2024. A few weeks later, the court of appeals’s judgment in TPC Group Litigation reversed the MDL court’s orders denying special appearances and dismissed claims against various First Reserve, Alpha AIV, and SK entities. Only SK Capital Partners, LP, Sawgrass Holdings, L.P., and Sawgrass Holdings GP LLC were not appellants in that appeal. Plaintiffs thus argue that those three parties “slept on their rights because they filed Rule 91a motions to dismiss in 2021 but failed to join the First Reserve mandamus petition and waited until 2024 to request a rehearing from the MDL court and mandamus relief from an appellate court.”
In a per curiam opinion, the court of appeals nevertheless granted the writ. Noting that the TPC bankruptcy prodeeding stayed the MDL court until December 2023, and that Plaintiffs filed their eighth amended pleading later that month, Relators’ joint motion asking the trial court to reconsider its earlier Rule 91 ruling, filed in February 2024, was not unreasonable. Nor was Relators’ filing their petition for writ of mandamus after another two months. Plaintiffs’ laches argument thus bit the dust.
The court turned next to Plaintiffs’ argument tht the law of the case doctrine precludes mandamus relief since Relators failed to seek a rehearing from SCOTX after it denied mandamus relief on the third amended petition. Though admitting that a denial of mandamus relief is not a decision on the merits, Plaintiffs tried to argue that SCOTX really did reach the merits on Plaintiffs’ negligent undertaking claims, “such that a lower court cannot now grant relief the higher court denied.” But that argument ignored the fact that SCOTX denied mandamus because of the pending bankruptcy proceeding, in which the bankruptcy court subsequently directed Plaintiffs to replead when litigation resumed in state court. Consequently, the court ruled that SCOTX’s opinion and judgment in First Reserve did not bar subsequent mandamus relief.
Turning to Relators’ Rule 91 motion, the court first decided that the MDL court had authority to consider Relators’ motion for rehearing its prior order denying dismissal. The question then became whether Plaintiffs’ petition passed muster under Rule 91a as to SK Capital Partners, which Plaintiffs added to the case in the eighth amended petition. Observing that Plaintiffs generally lumped SK Capital Partners with other entities generically described as “owners,” the court determined that that the petition didn’t allege that OSHA cited or fined SK, contracted with TPC to provide operational services, or was responsible for the acts or omissions of the three contractor defendants. In response to Plaintiffs allegation that SK was negligent per se because TPC did not submit a timely permit compliance certification with TCEQ, the court observed that SK had no permit to comply with in the first place. Additionally, Plaintiffs’ asserted further that SK and other defendants were liable for negligence and gross negligence because “they caused the explosions at the TPC plan by deciding to not provide risk mitigation and maintenace.” So, did they state a valid negligent undertaking theory against SK in the eighth amended petition? To make out a negligent undertaking claim, the court stated, [t]he complained-of undertaking must be an affirmative course of action, not an omission, nor may it be premised on a promise to render a service that is not accompanied by either performance or reliance on the promise by the injured party.” They didn’t do that. Instead, their claims “rely upon omissions by a separate corporate entity and therefore suffer from the same deficiencies identifed by [SCOTX] in First Reserve.” The MDL thus abused its discretion by denying SK’s Rule 91a motion to dismiss.
Next up was Sawgrass Holding, L.P. Plaintiffs made the same arguments about “control” and veil-piercing that they made about the other investor defendants. And the court of appeals gave the same answer. Ditto for Sawgrass Holdings GP LLC. Plaintiffs tried to assert that Sawgrass Holdings GP could be held directly liable because the board “maintain[ed] such a high degree of operational control and direction, usurped safety functions, financial interest, and ownership, over TPC, it is really Sawgrass, which is owned by funds that are sponsored by First Reserve and SK Capital, which governs TPC Group, LLC and TPC Group, Inc. and operated TPC’s Port Neches plant by their direct conduct and for their personal benefit.”But, as the court of appeals, pointed out, none of this verbiage shows that any of those entities actually operated the plant. While there might be something to an argument that one or more of these entities had a sufficient degree of control to “give rise to indirect liability,” the court added, the bankruptcy court enjoined any veil-piercing claims in the state litigation. So, without operation, there can be no direct liability. The trial court failed “to perform the ‘surgical’ work of excising veil-piercing claims from negligent undertaking claims,” and no amount of artful pleading can hide the ball. The MDL court thus abused its discretion by denying Sawgrass Holdings GP’s motion to dismiss.
This decision should put an end to the effort to hold TPC’s investors directly liable as alter egos of the plant operator. We’re not sure who is left at this point, but the pot has gotten a whole lot smaller.
