Fire Prot. Serv., Inc. v. Survitec Survival Prods., Inc.
| Decision Date | 03 June 2022 |
| Docket Number | 21-1088 |
| Citation | 649 S.W.3d 197 |
| Parties | FIRE PROTECTION SERVICE, INCORPORATED, Appellant, v. SURVITEC SURVIVAL PRODUCTS, INCORPORATED, Appellee |
| Court | Texas Supreme Court |
Wallace B. Jefferson, Austin, Nicholas B. Bacarisse, William Scott Matney, Melanie Plowman, Houston, for Appellant.
David Charles McLauchlan, Jeremy J. Gaston, Houston, Peter Alexander McLauchlan, for Appellee.
Atty. Gen. W. Kenneth Paxton Jr., Judd E. Stone II, Brent Webster, Houston, Bill Davis, Austin, Natalie D. Thompson, for Amicus Curiae Office of the Solicitor General of Texas.
Nicholas Goldin, Joshua Polster, Mark R. Trachtenberg, Houston, Anthony C. Piccirillo, for Amicus Curiae Association of Equipment Manufacturers.
A life-raft supplier entered into an oral agreement with a dealer allowing the dealer to sell and service the life rafts. The parties operated under their at-will agreement for years. During that time, the Legislature passed a statute that requires good cause for suppliers to terminate certain dealer agreements and imposes liability on suppliers who fail to comply. The supplier here terminated the agreement without cause six years after the statute took effect. The dealer sued for damages, claiming the termination was wrongful because the supplier lacked the good cause the statute required.
The Fifth Circuit asks whether application of the statute to the parties’ preexisting agreement violates the Texas Constitution's prohibition against retroactive laws. We conclude it does not.
Survitec Survival Products, Inc., manufactures marine safety equipment, including life rafts. In the 1990s, Fire Protection Service, Inc., (FPS) orally agreed to be an authorized dealer and servicer of Survitec's life rafts. The parties agreed either of them could terminate their agreement at any time, for any reason or for no reason.
Several years later, the Legislature enacted the Fair Practices of Equipment Manufacturers, Distributors, Wholesalers, and Dealers Act. See TEX. BUS. & COM. CODE §§ 57.001 –.402. The Act prohibits a supplier from terminating a dealer agreement without good cause. Id. § 57.153.
Nearly six years after the Act took effect, Survitec notified FPS that it was terminating their relationship. It is undisputed that Survitec did not provide FPS any reason for the termination. FPS sued Survitec in state district court, and Survitec removed the case to federal court. FPS alleges that Survitec violated the Act by, among other things, terminating without cause.
The case was tried to the district court without a jury. At the end of FPS's case-in-chief, Survitec moved for judgment on partial findings under Federal Rule of Civil Procedure 52(c). Survitec argued that applying the Act to the parties’ preexisting at-will agreement would violate the prohibition on retroactive laws in Article I, Section 16 of the Texas Constitution. The district court agreed. It granted Survitec's motion and entered judgment for Survitec.
FPS appealed and, at FPS's request, the Fifth Circuit certified to us the following question:
Does the application of the [Act] to the parties’ agreement violate the retroactivity clause in article I, section 16 of the Texas Constitution ?
Fire Prot. Serv., Inc. v. Survitec Survival Prods., Inc. , 18 F.4th 802, 805 (5th Cir. 2021).
The Fair Practices of Equipment Manufacturers, Distributors, Wholesalers, and Dealers Act regulates the business relationships between manufacturers or suppliers of certain types of equipment and the independent dealers that sell the equipment to the public. Act of May 25, 2011, 82d Leg., R.S., ch. 1039, § 1, 2011 Tex. Gen. Laws 2646, 2646. The Act applies to a "dealer agreement," which the Act defines as "an oral or written agreement or arrangement, of definite or indefinite duration, between a dealer and a supplier that provides for the rights and obligations of the parties with respect to the purchase or sale of equipment or repair parts." TEX. BUS. & COM. CODE § 57.002(4). It provides that "[a] supplier may not terminate a dealer agreement without good cause." Id. § 57.153.1 And it enumerates circumstances in which good cause for termination of a dealer agreement exists. Id. § 57.154(a).
The Act provides dealers a statutory remedy for violations. It states:
If a supplier violates any provision of this chapter, a dealer may bring an action against the supplier in a court of competent jurisdiction for damages sustained by the dealer as a consequence of the supplier's violation, including damages for lost profits, together with the actual costs of the action, including the dealer's attorney's fees and paralegal fees and the costs of arbitrators.
Id. § 57.401(a). The statutory remedy is not exclusive and is in addition to any other remedy permitted by law or that may exist under the parties’ agreement. Id. §§ 57.401(b), .402.
The Legislature passed the Act on May 25, 2011, and the Governor signed it into law the following month, on June 17, 2011. It took effect two and a half months later, on September 1, 2011. Act of May 25, 2011, § 5. The Act applies to all dealer agreements entered into or renewed on or after the Act's effective date. Id. § 4(a)(1). A dealer agreement existing before September 1, 2011, is governed by the law in effect before then, unless it "has no expiration date" and "is a continuing contract." Id. § 4(a)(2), (b).
The Texas Constitution commands: "No bill of attainder, ex post facto law, retroactive law, or any law impairing the obligation of contracts, shall be made." TEX. CONST. art. I, § 16. The U.S. Constitution, unlike the Texas Constitution, does not expressly prohibit "retroactive" laws. But it does prohibit bills of attainder, ex post facto laws, and laws impairing the obligation of contracts. See U.S. CONST. art. I, §§ 9 (), 10 ("No State shall ... pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts ....").
As the U.S. Supreme Court has observed, a "presumption against retroactive legislation is deeply rooted in our jurisprudence." Landgraf v. USI Film Prods. , 511 U.S. 244, 265, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994). It rests on the "principle that the legal effect of conduct should ordinarily be assessed under the law that existed when the conduct took place." Id. (quoting Kaiser Aluminum & Chem. Corp. v. Bonjorno , 494 U.S. 827, 855, 110 S.Ct. 1570, 108 L.Ed.2d 842 (1990) (Scalia, J., concurring)).
Distilling over 150 years of precedents involving the Texas Constitution's prohibition against retroactive laws, we set forth in Robinson v. Crown Cork & Seal Co. a "fuller statement of its proper application." 335 S.W.3d 126, 136 (Tex. 2010). We observed that the presumption against retroactive laws advances two fundamental objectives of our system of government: the protection of "reasonable, settled expectations" and protection against "abuses of legislative power." Id. at 139 (citing Landgraf , 511 U.S. at 265–66, 114 S.Ct. 1483 ). Put differently, our constitutional prohibition against retroactive laws "protects settled expectations that rules are to govern the play and not simply the score, and prevents the abuses of legislative power that arise when individuals or groups are singled out for special reward or punishment." Id. at 145. To determine whether a statute is unconstitutionally retroactive, we first consider the nature of the rights claimed and the statute's impact on them. Id. at 147. If the statute disturbs a party's settled expectations, we then must consider whether the statute serves a public interest as opposed to simply benefiting one or a few private entities. Id. at 149.
Although Robinson refined our framework for analyzing whether laws are unconstitutionally retroactive, it did not break new ground but, rather, provided a unifying statement of the principles that we had applied in our earlier cases. One key principle is that a law is not retroactive in the constitutional sense unless it disrupts or impairs settled expectations. As we stated in In re A.V. , "[a] law that does not upset a person's settled expectations in reasonable reliance upon the law is not unconstitutionally retroactive." 113 S.W.3d 355, 361 (Tex. 2003) (citing Landgraf , 511 U.S. at 269–70, 114 S.Ct. 1483 ). In that case, we held that an amendment to the Family Code creating a new ground for parental termination based on criminal conduct and incarceration was not unconstitutionally retroactive as applied to a father who had been convicted before the amendment was enacted. Id. at 361–62. We concluded that the father "could not reasonably expect that the State would not act to provide a safe environment for his children while he was imprisoned." Id. at 361. Similarly, in Texas Water Rights Commission v. Wright , we upheld a statute authorizing the forfeiture of water permits for non-use, even though the permits were issued before the statute's enactment. 464 S.W.2d 642, 649 (Tex. 1971). We held that permit holders "could reasonably expect that their rights would be subjected to a remedy enforcing the conditions inherently attached to those rights." Id.
In determining whether a law disrupts or impairs settled expectations, we consider whether the law gives parties a "grace period" to adapt before the law takes effect. In City of Tyler v. Likes , we held that an amendment to the Tort Claims Act that made the city immune from a negligence claim for flooding that occurred before the amendment's effective date was not unconstitutionally retroactive. 962 S.W.2d 489, 502 (Tex. 1997). We noted that the amendment did not entirely eliminate the plaintiff's right to sue because she had time to file her lawsuit before the amendment took effect, including "more than...
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