The Texas Supreme Court will take up a question certified from the U.S. Fifth Circuit regarding the constitutionality of a statute enacted by the Texas Legislature in 2011 as it applies to oral agreements entered into prior to the effective date of the statute. Fire Protection Service, Inc. v. Survitec Survival Products, Inc. (No. 21-20145) arose from an oral agreement between an equipment dealer (Fire Protection) and equipment supplier (Survitec) whereby the supplier provided life rafts for sale by the dealer. The supplier later terminated the agreement without notice of explanation, but not before the 2011 Legislature had passed the Fair Practices of Equipment Manufacturers, Distributors, Wholesalers, and Dealers Act. Among other things, the Act requires suppliers to provide good cause and notice to a dealer before terminating an agreement, as well as to buy back the dealer’s inventory of the supplier’s product. The dealer sued the supplier for failing to comply with the statute. The supplier argued that the application of the law to the oral agreement violated the Texas Constitution’s prohibition of retroactive laws (Art. I, §16). The federal district court agreed with the supplier. The dealer appealed to the Fifth Circuit, which determined that the question was too close to call without input from the Texas Supreme Court. SCOTX certified the question and will hear it on March 22.
This case offers SCOTX the opportunity to expand on its analysis of Art. I, §16 in Robinson v. Crown Cork & Seal Co., Inc., 335 S.W.3d 126 (Tex. 2010). As you may recall, Robinson involved the retroactive application of a statute limiting the successor liability of an entity that had acquired a business that had once sold insulation containing asbestos. In a seminal opinion by Chief Justice Hecht, the Court held that the statute was indeed unconstitutionally retroactive, largely because it applied to only one entity and that no compelling public interest was served by its retroactive application. SCOTX, however, established a three-pronged test for determining the issue that requires courts to assess: (1) the nature of the prior right impaired by the statute; (2) the extent of the impairment; and (3) the nature and strength of the public interest served by the statute as evidenced by the Legislature’s factual findings. See Robinson, at 145. While recognizing the “heavy presumption against retroactive laws,” Chief Justice Hecht cautioned courts not to throw out retroactive statutes unless there is a “compelling public interest” served by doing so. Given the absence of controlling authority in Texas law, the Fifth Circuit declined to make an “Erie guess” as to what that law might be without asking SCOTX first. We, along with everyone else who deals with legislation that affects pending or future litigation, will want to pay close attention to the answer.