Elec. Reliability Council of Tex., Inc. v. Panda Power Generation Infrastructure Fund, LLC

• Decision Date: 16 April 2018
• Docket Number: No. 05-17-00872-CV,05-17-00872-CV
• Citation: 552 S.W.3d 297
• Parties: ELECTRIC RELIABILITY COUNCIL OF TEXAS, INC., Appellant v. PANDA POWER GENERATION INFRASTRUCTURE FUND, LLC d/b/a Panda Power Funds ; Panda Sherman Power Holdings, LLC; Panda Sherman Power Intermediate Holdings I, LLC; Panda Sherman Power Intermediate Holdings II, LLC; Panda Sherman Power, LLC ; Panda Temple Power Holdings, LLC ; Panda Temple Power Intermediate Holdings I, LLC ; Panda Temple Power Intermediate Holdings II, LLC ; Panda Temple Power, LLC; Panda Temple Power II Holdings LLC; Panda Temple Power II Intermediate Holdings I, LLC; Panda Temple Power II Intermediate Holdings II, LLC; and Panda Temple Power II, LLC, Appellees and In re Electric Reliability Council of Texas, Inc., Relator
• Court: Texas Court of Appeals

552 S.W.3d 297

ELECTRIC RELIABILITY COUNCIL OF TEXAS, INC., Appellant

v.PANDA POWER GENERATION INFRASTRUCTURE FUND, LLC d/b/a Panda Power Funds ; Panda Sherman Power Holdings, LLC; Panda Sherman Power Intermediate Holdings I, LLC; Panda Sherman Power Intermediate Holdings II, LLC; Panda Sherman Power, LLC ; Panda Temple Power Holdings, LLC ; Panda Temple Power Intermediate Holdings I, LLC ; Panda Temple Power Intermediate Holdings II, LLC ; Panda Temple Power, LLC; Panda Temple Power II Holdings LLC; Panda Temple Power II Intermediate Holdings I, LLC; Panda Temple Power II Intermediate Holdings II, LLC; and Panda Temple Power II, LLC, AppelleesandIn re Electric Reliability Council of Texas, Inc., Relator

No. 05-17-00872-CV

Court of Appeals of Texas, Dallas.

Opinion Filed April 16, 2018

Rehearing En Banc Denied July 10, 2018

Brandon Duane Gleason, Skelton & Woody, 248 Addie Roy Rd., Ste. B302, Austin TX 78746, Chad V. Seely, Electric Reliability Council of Texas, 7620 Metro Center Dr., Austin TX 78744–1613, Erika Kane, Electric Reliability Council of Texas, Inc., 7620 Metro Center Drive, Austin TX 78744, J. Hampton Skelton, Skelton & Woody, 248 Addie Roy Road, Suite B302, Austin TX 78746, Nathan Myrick Bigbee, Electric Reliability Council of Texas, 7620 Metro Center Drive, Austin TX 78744, Nicholas Bacarisse, Alexander Dubose Jefferson & Townsend, 515 Congress Ave., Suite 2350, Austin TX 78701, Rachel Anne Ekery, Alexander Dubose Jefferson & Townsend LLP, 515 Congress Ave., Suite 2350, Austin TX 78701–3562, Wallace B. Jefferson, Alexander Dubose Jefferson & Townsend LLP, 515 Congress Avenue, Suite 2350, Austin TX 78701–3562, for Appellant.

Andrew Guthrie,Haynes and Boone, LLP, 2323 Victory Avenue, Ste. 700, Dallas TX 75219, Ben L. Mesches, Haynes And Boone, LLP, 2323 Victory Avenue, Suite 700, Dallas TX 75219, David Merryman, Haynes and Boone, LLP, 2323 Victory Ave., Suite 700, Dallas TX 75219, Leslie Conant Thorne, Haynes and Boone, LLP, 600 Congress Ave., Ste. 1300, Austin TX 78701–2962, Roger D. Sanders, Sanders, O'Hanlon, Motley and Young, PLLC, 111 S. Travis Street, Sherman TX 75090–5928, Werner A. Powers, Haynes and Boone, LLP, 2323 Victory Ave., Ste. 700, Dallas TX 75219–7673, for Appellees.

Before Justices Francis, Lang, and Evans

Opinion by Justice Lang

In this consolidated interlocutory appeal and mandamus proceeding, we must decide whether appellees/real parties in interest, a group of limited liability companies¹ (collectively, "Panda"), are barred from proceeding with claims of fraud, negligent misrepresentation, and breach of fiduciary duty against appellant/relator Electric Reliability Council of Texas, Inc. ("ERCOT") based on representations by ERCOT respecting future demand for electric power in Texas. In the trial court, ERCOT filed two pleas to the jurisdiction, asserting Panda’s claims are barred because (1) the State’s sovereign immunity extends to ERCOT as to this lawsuit and (2) alternatively, the Public Utility Commission of Texas ("PUC") has exclusive jurisdiction over Panda’s claims. The trial court denied those jurisdictional pleas.

In this Court, ERCOT asserts in two issues that the trial court erred by denying its pleas to the jurisdiction. Further, ERCOT contends this Court has appellate jurisdiction over this case pursuant to section 51.014(a)(8) of the Texas Civil Practice and Remedies Code, see TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(8) (West Supp. 2017), or, alternatively, mandamus jurisdiction pursuant to Texas Government Code section 22.221(b), see TEX. GOV'T CODE ANN. § 22.221(b) (West Supp. 2017).

We conclude this Court lacks jurisdiction as to ERCOT’s interlocutory appeal, but has mandamus jurisdiction over this case. Additionally, we decide in favor of ERCOT as to the trial court’s denial of its plea to the jurisdiction based on sovereign immunity. We need not reach ERCOT’s issue respecting its plea to the jurisdiction based on exclusive jurisdiction.

We dismiss ERCOT’s interlocutory appeal for lack of jurisdiction. Further, we conditionally grant ERCOT’s petition for writ of mandamus and direct the trial court to vacate its order denying ERCOT’s plea to the jurisdiction based on sovereign immunity and dismiss this case for lack of jurisdiction.

I. FACTUAL AND PROCEDURAL CONTEXT

In 1999, the Texas Legislature enacted Chapter 39 of the Texas Public Utility Regulatory Act ("PURA") to restructure the electric utility industry in Texas. See TEX. UTIL. CODE ANN. §§ 39.001 –.916 (West 2016). Pursuant to PURA section 39.151, the PUC was required to certify an "independent system operator" ("ISO") to, among other functions, "ensure the reliability and adequacy of the regional electrical network." See id. § 39.151(a) – (c). In 2001, the PUC certified ERCOT, a Texas non-profit corporation, as the ISO.

We quote Panda’s live petition at length because it clearly identifies Panda’s position. Panda contended in part (1) "[a]s part of its responsibilities as an ISO, ERCOT publishes market data for use by those who participate in the ERCOT market"; (2) in approximately 2011 and 2012, ERCOT "sponsored false and misleading market reports describing capacity, demand, and reserves in the ERCOT region" (the "CDRs") and "broadcast[ ] the false market information throughout the state" via ERCOT’s website, ERCOT press releases, and "ERCOT sponsored interviews with the press"; (3) additionally, ERCOT representatives "confirmed" the "CDR results" at presentations and meetings in Texas; (4) within the ERCOT region, "the CDRs or similar reports form the basis of investment analysis and drive the investment" as to construction of new power plants; (5) Panda "relied on [ERCOT’s] representations to build three power plants at a cost of $2.2 billion"; (6) "[a]fter the investments were irrevocably committed and after the power plants were under construction, [ERCOT] admitted that its earlier representations were false"; and (7) the consequences to Panda were "devastating," as the Panda entities "now sell power into the grid ... at a fraction of the price they would have enjoyed had the false market data been accurate." As described above, Panda asserted claims for fraud, negligent misrepresentation, and breach of fiduciary duty. Specifically, according to Panda, (1) "[t]he ERCOT publications were made negligently or fraudulently" and/or ERCOT "negligently or fraudulently failed to disclose the falsity sooner than it did," and (2) ERCOT owed and breached "formal" and "informal" fiduciary duties to Panda "to act independently and competently in the performance of its responsibilities as an ISO."²

ERCOT filed a general denial answer. Additionally, approximately one year later, ERCOT filed its jurisdictional plea based on exclusive jurisdiction described above. Following a response by Panda and a hearing, that plea to the jurisdiction was denied by the trial court.

Several months later, ERCOT filed a "Motion for Reconsideration of ERCOT’s First Plea to the Jurisdiction and Alternative Amended Jurisdictional Plea." Therein, ERCOT contended in part that sovereign immunity bars Panda’s claims because "an entity exercising the government’s regulatory powers shares its immunity with respect to that exercise." In support of its arguments, ERCOT cited, inter alia , federal cases involving federal "self-regulatory organizations" ("SROs").

Panda filed a response in which it asserted in part "the law is clear that ERCOT is not the type of entity entitled to the protections of immunity because: (1) ERCOT is not a state agency or political subdivision of the state; (2) ERCOT does not perform state governmental functions; and (3) even if ERCOT was deemed to perform a governmental function, ERCOT has the sole discretion to determine the content in the CDRs and other representations." Further, Panda contended (1) because "ERCOT’s CDR preparation and other representations do not involve quasi-judicial activities and are not regulatory," the SRO cases cited by ERCOT do not support immunity, and (2) "[e]ven if preparing CDRs is a ‘regulatory’ activity," it is "not the sort of regulation at issue" in those SRO cases.

At the hearing on the motion, ERCOT argued in part that it is designated to perform only "governmental functions," "performs no private functions," and is "not in any business other than doing what the PUC tells ERCOT to do." Further, ERCOT stated its plea to the jurisdiction on sovereign immunity is based "solely on the pleadings." The trial court denied ERCOT’s motion for reconsideration and alternative plea to the jurisdiction. This consolidated interlocutory appeal and mandamus proceeding timely followed.³

II. ERCOT'S ISSUES

A. Applicable PURA Provisions and PUC Rules

Section 39.151 requires the PUC to "certify an independent organization or organizations" to perform the following functions:

(1) ensure access to the transmission and distribution systems for all buyers and sellers of electricity on nondiscriminatory terms;

(2) ensure the reliability and adequacy of the regional electrical network;

(3) ensure that information relating to a customer’s choice of retail electric provider is conveyed in a timely manner to the persons who need that information; and

(4) ensure that electricity production and delivery are accurately accounted for among the generators and wholesale buyers and sellers in the region.

UTIL. § 39.151(a), (c). "Independent organization" means "an independent system operator or other person that is sufficiently independent of any producer or seller of electricity that its decisions will not be unduly influenced by any producer or seller." Id. § 39.151(b). Further, the PUC "shall adopt and enforce rules relating to the reliability of the regional electrical network and accounting for the production and delivery of electricity among generators and all other market participants, or may delegate to an independent organization responsibilities for establishing or enforcing such rules." Id. § 39.151(d)....